· pricing supplement (incorporated with limited liability under the laws of the republic of...

PRICING SUPPLEMENT

(incorporated with limited liability under the laws of the Republic of Korea) (acting through its principal office in Korea)

Issue of US$300,000,000 Floating Rate Notes due 2023 under the US$8,000,000,000 G l o b a l M e d i u m T e r m N o t e P r o g r a m m e

THE NOTES TO WHICH THIS PRICING SUPPLEMENT RELATES (THE NOTES) HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES ACT), OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT), EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. ACCORDINGLY, THE NOTES WILL BE OFFERED AND SOLD ONLY OUTSIDE THE UNITED STATES TO NON-U.S. PERSONS IN RELIANCE ON REGULATION S.

Joint Bookrunner and Lead Manager

STANDARD CHARTERED BANK (TAIWAN) LIMITED

Joint Bookrunner and Manager

SG SECURITIES (HK) LIMITED, TAIPEI BRANCH

Co-Managers

KGI BANK KGI SECURITIES CO. LTD.

CTBC BANK CO., LTD. PRESIDENT SECURITIES CORPORATION

THE SHANGHAI COMMERCIAL & SAVINGS BANK MEGA INTERNATIONAL COMMERCIAL BANK

CO., LTD.

TAIPEI FUBON COMMERCIAL BANK CO., LTD. FUBON SECURITIES CO., LTD.

E.SUN COMMERCIAL BANK, LTD. TAISHIN INTERNATIONAL BANK CO., LTD.

The date of this Pricing Supplement is 12 March 2018.

PRICING SUPPLEMENT 12 March 2018

KOOKMIN BANK

(acting through its principal office in Korea) Issue of US$300,000,000 Floating Rate Notes due 2023

under the US$8,000,000,000 Global Medium Term Note Programme

This document constitutes the Pricing Supplement relating to the issue of Notes described herein. The terms and conditions of the Notes (the “Conditions”) shall consist of the terms and conditions set out under the heading “Terms and Conditions of the Notes” in the Offering Circular dated 3 April 2017, as supplemented by the Supplemental Offering Circular dated 25 August 2017 (together, the “Offering Circular”), as amended or supplemented, as the case may be, in this Pricing Supplement. Terms used herein shall be deemed to be defined as such for the purposes of the Conditions set forth in the Offering Circular. This Pricing Supplement contains the final terms of the Notes and must be read in conjunction with the Offering Circular.

The Notes have not been and will not be registered under the Financial Services Commission of Korea under the Financial Investment Services and Capital Markets Act of Korea. Accordingly, the Notes may not be offered, sold or delivered, directly or indirectly, in Korea or to, or for the account or benefit of, any resident of Korea (as such term is defined under the Foreign Exchange Transaction Law of Korea and its Enforcement Decree), except as otherwise permitted under applicable Korean laws and regulations. In addition, during the first year after the issuance of the Notes, the Notes may not be transferred to any resident of Korea other than a Korean QIB who is registered with KOFIA as a Korean QIB and subject to the requirement of monthly reports with the KOFIA of its holding of Korean QIB bonds as defined in the Regulation on Issuance, Public Disclosure, etc. of Securities of Korea, provided that (a) the Notes are denominated, and the principal and interest payments thereunder are made, in a currency other than Korean won, (b) the amount of the Notes acquired by such Korean QIBs in the primary market is limited to less than 20% of the aggregate issue amount of the Notes, (c) the Notes are listed on one of the major overseas securities markets designated by the Financial Supervisory Service of Korea, or certain procedures, such as registration or report with a foreign financial investment regulator, have been completed for offering of the Notes in a major overseas securities market, (d) the one-year restriction on offering, delivering or selling of Notes to a Korean resident other than a Korean QIB is expressly stated in the Notes, the relevant purchase agreement and offering circular and (e) the Company and the Initial Purchasers shall individually or collectively keep the evidence of fulfillment of conditions (a) through (d) above after having taken necessary actions therefor.

1. Issuer: Kookmin Bank (acting through its principal office in Korea)

2. (i) Series Number: 2018-3

(ii) Tranche Number: 1

3. Specified Currency or Currencies: United States dollars (US$)

4. Aggregate Nominal Amount:

(i) Series: US$300,000,000

(ii) Tranche: US$300,000,000

5. (i) Issue Price: 100.00% of the Aggregate Nominal Amount

(ii) Net Proceeds: US$299,400,000

6. (i) Specified Denominations: (in the case of Registered Notes, this means the minimum integral amount in which transfers can be

US$200,000 and, in excess thereof, integral multiples of US$1,000

made)

(ii) Calculation Amount: US$1,000

7. (i) Issue Date: 3 April 2018

(ii) Interest Commencement Date: Issue Date

8. Maturity Date: Interest Payment Date falling in or nearest to 3 April 2023

9. Interest Basis: Three month US$ LIBOR + 0.78% per annum (further particulars specified below)

10. Redemption/Payment Basis: Redemption at par

11. Change of Interest Basis or Redemption/ Payment Basis:

Not Applicable

12. Put/Call Options: Not Applicable

13. Status of the Notes: Senior

14. Listing: Singapore Exchange Securities Trading Limited (the “Singapore Stock Exchange”)

Taipei Exchange

Application will be made by the Issuer to the Taipei Exchange (the “TPEx”) for the listing and trading of the Notes on the TPEx. TPEx is not responsible for the content of this document and the Offering Circular and any amendment and supplement thereto and no representation is made by TPEx to the accuracy or completeness of this document and the Offering Circular and any amendment and supplement thereto. TPEx expressly disclaims any and all liability for any losses arising from, or as a result of the reliance on, all or part of the contents of this document and the Offering Circular and any amendment and supplement thereto. Admission to the listing and trading of the Notes on the TPEx shall not be taken as an indication of the merits of the Issuer or the Notes. The Notes will be traded on the TPEx pursuant to the applicable rules of the TPEx. Effective date of listing of the Notes is on or about 3 April 2018

15. Method of distribution: Syndicated

Provisions Relating to Interest (if any) Payable

16. Fixed Rate Note Provisions Not Applicable

17. Floating Rate Note Provisions Applicable

(i) Specified Period(s)/ Specified Interest Payment Dates:

3 April, 3 July, 3 October and 3 January of each year, beginning 3 July 2018, up to and including the Maturity Date

(ii) Business Day Convention: Modified Following Business Day Convention

(iii) Additional Business Centre(s): Taipei

(iv) Manner in which the Rate of Interest and Interest Amount are to be determined:

Screen Rate Determination

(v) Party responsible for calculating the Rate of Interest and Interest Amount (if not the Agent):

Not Applicable

(vi) Screen Rate Determination:

—Reference Rate and Relevant Financial Centre:

Reference Rate: Three month US$ LIBOR

Relevant Financial Centre: London

—Interest Determination Date(s): Two London business days prior to the start of each Interest Period

—Relevant Screen Page: Reuters screen page “LIBOR01”

(vii) ISDA Determination: Not Applicable

(viii) Margin(s): + 0.78% per annum

(ix) Minimum Rate of Interest: Not Applicable

(x) Maximum Rate of Interest: Not Applicable

(xi) Day Count Fraction: Actual/360, adjusted

(xii) Fall back provisions, rounding provisions and any other terms relating to the method of calculating interest on Floating Rate Notes, if different from those set out in the Conditions:

Not Applicable

18. Zero Coupon Note Provisions Not Applicable

19. Index Linked Note Provisions Not Applicable

20. Dual Currency Note Provisions Not Applicable

Provisions Relating to Redemption

21. Issuer Call Not Applicable

22. Investor Put Not Applicable

23. Final Redemption Amount of each Note:

Par

24. Early Redemption Amount of each Note payable on redemption for taxation reasons or on event of default and/or the method of calculating the same (if required or if different from

Condition 7(e) applies

that set out in Condition 7(e)):

General Provisions Applicable to the Notes

25. Form of Notes: Registered Notes:

Regulation S Global Note (US$300,000,000 nominal amount) registered in the name of a nominee for a common depositary for Euroclear and Clearstream, Luxembourg

26. Additional Financial Centre(s) or other special provisions relating to Payment Dates:

Seoul, Taipei, London and New York City

27. Talons for future Coupons or Receipts to be attached to Definitive Bearer Notes (and dates on which such Talons mature):

No

28. Details relating to Partly Paid Notes: amount of each payment comprising the Issue Price and date on which each payment is to be made and consequences of failure to pay, including any right of the Issuer to forfeit the Notes and interest due on late payment:

Not Applicable

29. Details relating to Instalment Notes:

(i) Instalment Amount(s): Not Applicable

(ii) Instalment Date(s): Not Applicable

30. Redenomination applicable: Redenomination not applicable

31. Other terms or special conditions: Not Applicable

Distribution

32. (i) If syndicated, names of Managers: Lead ManagerStandard Chartered Bank (Taiwan) Limited

Joint ManagerSG Securities (HK) Limited, Taipei Branch

Co-ManagersKGI Bank KGI Securities Co. Ltd. CTBC Bank Co., Ltd. President Securities Corporation The Shanghai Commercial & Savings Bank, Ltd. Mega International Commercial Bank Co., Ltd. Taipei Fubon Commercial Bank Co., Ltd. Fubon Securities Co., Ltd. E.SUN Commercial Bank, Ltd. Taishin International Bank Co., Ltd.

(ii) Stabilising Manager(s) (if any): Not Applicable

33. If non-syndicated, name of relevant Dealer:

Not Applicable

34. U.S. Selling Restrictions: Reg. S Compliance Category 2, TEFRA not applicable

35. Additional selling restrictions: The Notes have not been, and shall not be, offered, sold or re-sold, directly or indirectly to investors other than "professional investors" as defined under the Article 2-1 of the Taipei Exchange Rules Governing Management of Foreign Currency Denominated International Bonds (the “TPEx Rules”). Purchasers of the Notes are not permitted to sell or otherwise dispose of the Notes except by transfer to a Professional Investor.

Under the TPEx Rules, "professional investors" include "professional institutional investors" as defined under Paragraph 2 of Article 4 of the Financial Consumer Protection Act of the ROC.

Operational Information

36. Any clearing system(s) other than DTC, Euroclear and Clearstream, Luxembourg and the relevant identification number(s):

Not Applicable

37. Delivery: Delivery against payment

38. Additional Paying Agent(s) (if any): Not Applicable

39. Registrar: The Bank of New York Mellon SA/NV, Luxembourg Branch

40. Fiscal Agent and Common Depositary: The Bank of New York Mellon, London Branch

41. ISIN: XS1793243939

Common Code: 179324393

LISTING APPLICATION

This Pricing Supplement comprises the details required to list the issue of Notes described herein pursuant to the US$8,000,000,000 Global Medium Term Note Programme of Kookmin Bank.

The Singapore Stock Exchange assumes no responsibility for the correctness of any of the statements made or opinions expressed or reports contained in this Pricing Supplement. Approval in-principle from, admission to the Official List of, and quotation of any Notes on, the Singapore Stock Exchange is not to be taken as an indication of the merits of Kookmin Bank, the Programme or the Notes.

TPEx is not responsible for the content of this document and the Offering Circular and any amendment and supplement thereto and no representation is made by TPEx to the accuracy or completeness of this document and the Offering Circular and any amendment and supplement thereto. TPEx expressly disclaims any and all liability for any losses arising from, or as a result of the reliance on, all or part of the contents of this document and the Offering Circular and any amendment and supplement thereto. Admission to the listing and trading of the Notes on the TPEx shall not be taken as an indication of the merits of the Issuer or the Notes. The Notes will be traded on the TPEx pursuant to the applicable rules of the TPEx. Effective date of listing of the Notes is on or about 3 April 2018.

RESPONSIBILITY

The Issuer accepts responsibility for the information contained in this Pricing Supplement.

SCHEDULE A – RISK FACTORS RELATING TO THE NOTES AND OTHER INFORMATION

ADDITIONAL RISKS

Application will be made for the listing of the Notes on the TPEx. No assurances can be given as to whether the

Notes will be, or will remain, listing on TPEx or whether a trading market for the Notes will develop or as to the

liquidity of any such trading market. If the Notes fail to or cease to be listed on the TPEx, certain investors may

not invest in, or continue to hold or invest in, the Notes.

ROC TAXATION

The following is a general description of the principal ROC tax consequences for investors receiving interest in

respect of, or disposing of, the Notes and is of a general nature based on the Issuer’s understanding of current

law and practice. It does not purport to be comprehensive and does not constitute legal or tax advice.

This general description is based upon the law as in effect on the date hereof and that the Notes will be issued,

offered, sold and re-sold to professional investors as defined under the Taipei Exchange Rules Governing

Management of Foreign Currency Denominated International Bonds only. This description is subject to change

potentially with retroactive effect. Investors should appreciate that, as a result of changing law or practice, the

tax consequences may be otherwise than as stated below. Investors should consult their professional advisers on

the possible tax consequences of subscribing for, purchasing, holding or selling the Notes.

Interest on the Notes

As the Issuer of the Notes is not a ROC statutory tax withholder, there is no ROC withholding tax on the

interest or deemed interest to be paid by the Issuer on the Notes.

Payments of interest or deemed interest under the Notes to an ROC individual holder are not subject to ROC

income tax as such payments received by him/her are not considered to be ROC-sourced income. However, such

holder must include the interest or deemed interest in calculating his/her basic income for the purpose of

calculating his/her alternative minimum tax (“AMT”), unless the sum of the interest or deemed interest and other

non- ROC-sourced income received by such holder and the person(s) who is (are) required to jointly file the tax

return in a calendar year is below $1 million New Taiwan Dollars ("NT$"). If the amount of the AMT exceeds

the annual income tax calculated pursuant to ROC Income Basic Tax Act (also known as the AMT Act), the

excess becomes such holder’s AMT payable.

ROC corporate holders must include the interest or deemed interest receivable under the Notes as part of

their taxable income and pay income tax at a flat rate of 20% (unless the total taxable income for a fiscal year is

under NT$500,000), as they are subject to income tax on their worldwide income on an accrual basis. The AMT

is not applicable.

Sale of the Notes

In general, the sale of corporate bonds or financial bonds is subject to 0.1% securities transaction tax (“STT”)

on the transaction price. However, Article 2-1 of the Securities Transaction Tax Act prescribes that STT will

cease to be levied on the sale of corporate bonds and financial bonds from 1 January 2010 to 31 December 2026.

Therefore, the sale of the Notes will be exempt from STT if the sale is conducted on or before 31 December 2026.

Starting from 1 January 2027, any sale of the Notes will be subject to STT at 0.1% of the transaction price, unless

otherwise provided by the tax laws that may be in force at that time.

Capital gains generated from the sale of bonds are exempt from income tax. Accordingly, ROC individual

and corporate holders are not subject to income tax on any capital gains generated from the sale of the Notes. In

addition, ROC individual holders are not subject to AMT on any capital gains generated from the sale of the

Notes. However, ROC corporate holders should include the capital gains in calculating their basic income for the

purpose of calculating their AMT. If the amount of the AMT exceeds the annual income tax calculated pursuant

to the ROC Income Basic Tax Act (also known as the AMT Act), the excess becomes the ROC corporate holders’

AMT payable. Capital losses, if any, incurred by such holders could be carried over 5 years to offset against

capital gains of same category of income for the purposes of calculating their AMT.

Non-ROC corporate holders with a fixed place of business (e.g., a branch) or a business agent in the ROC are

not subject to income tax on any capital gains generated from the sale of the Notes. However, their fixed place of

business or business agent should include any such capital gains in calculating their basic income for the purpose

of calculating AMT.

As to non-ROC corporate holders without a fixed place of business and a business agent in the ROC, they are

not subject to income tax or AMT on any capital gains generated from the sale of the Notes.

ROC SETTLEMENT AND TRADING

Investors with a securities book-entry account with an ROC securities broker and a foreign currency deposit

account with an ROC bank, may request the approval of the Taiwan Depositary & Clearing Corporation

("TDCC") for the settlement of the Notes through the account of TDCC with Euroclear or Clearstream,

Luxembourg and if such approval is granted by TDCC, the Notes may be so cleared and settled. In such

circumstances, TDCC will allocate the respective book-entry interest of such investor in the Notes position to the

securities book-entry account designated by such investor in the ROC. The Notes will be traded and settled

pursuant to the applicable rules and operating procedures of TDCC and the TPEx as domestic bonds.

In addition, an investor may apply to TDCC (by filing in a prescribed form) to transfer the Notes in its own

account with Euroclear or Clearstream, Luxembourg to the TDCC account with Euroclear or Clearstream,

Luxembourg for trading in the domestic market or vice versa for trading in overseas markets.

For such investors who hold their interest in the Notes through an account opened and held by TDCC with

Euroclear or Clearstream, Luxembourg, distributions of principal and/or interest for the Notes to such holders

may be made by payment services banks whose systems are connected to TDCC to the foreign currency deposit

accounts of the holders. Such payment is expected to be made on the second Taiwanese business day following

TDCC’s receipt of such payment (due to time difference, the payment is expected to be received by TDCC one

Taiwanese business day after the distribution date). However, when the holders will actually receive such

distributions may vary depending upon the daily operations of the ROC banks with which the holder has the

foreign currency deposit account.

RECENT DEVELOPMENTS

The Issuer’s unaudited and unreviewed preliminary financial data as of and for the year ended 31

December 2017 and the three months ended 31 December 2017 have been publicly released as part of KB

Financial Group, Inc.’s preliminary results announcement and are not included in the Offering Circular or this

pricing supplement. The Issuer’s audited consolidated financial statements as of and for the year ended 31

December 2017 are expected to be released on 30 March 2018. Purchasers of the Notes are deemed to

acknowledge that the settlement of the Notes will occur after the release of the Issuer’s audited consolidated

financial statements as of and for the year ended 31 December 2017.

Kookmin Bank’s Unaudited Consolidated Interim Financial Statements as of and for the nine months

ended 30 September 2017

The Issuer’s unaudited consolidated interim financial statements as of and for the nine months ended 30

September 2017 are attached to the back of this pricing supplement beginning on the following page.

Kookmin Bank and SubsidiariesIndexSeptember 30, 2017 and 2016

Page(s)

Report on Review of Interim Consolidated Financial Statements......................... 1~2

Interim Consolidated Financial Statements

Interim Consolidated Statements of Financial Position................................................ 3

Interim Consolidated Statements of Comprehensive Income .…………………….…… 4

Interim Consolidated Statements of Changes in Equity................................................ 5

Interim Consolidated Statements of Cash Flows………………….…….........…………. 6

Notes to the Interim Consolidated Financial Statements…..……………………..... 7~161

Report on Review of Interim Consolidated Financial Statements

(English Translation of a Report Originally Issued in Korean)

To the Shareholder and Board of Directors of Kookmin Bank

Reviewed Financial StatementsWe have reviewed the accompanying interim consolidated financial statements of Kookmin Bank and itssubsidiaries (collectively the “Group”). These financial statements consist of the interim consolidatedstatement of financial position of the Group as of September 30, 2017, and the related interim consolidatedstatements of comprehensive income for the three-month and nine-month periods ended September 30,2017 and 2016, and interim consolidated statements of changes in equity and cash flows for the nine-monthperiods ended September 30, 2017 and 2016, and a summary of significant accounting policies and otherexplanatory notes, expressed in Korean won.

Management's Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of these interim consolidated financialstatements in accordance with International Financial Reporting Standards as adopted by the Republic ofKorea (“Korean IFRS”) 1034, Interim Financial Reporting, and for such internal control as managementdetermines is necessary to enable the preparation of interim consolidated financial statements that are freefrom material misstatement, whether due to fraud or error.

Auditor's ResponsibilityOur responsibility is to issue a report on these interim consolidated financial statements based on ourreview.

We conducted our review in accordance with quarterly or semi-annual review standards established by theSecurities and Futures Commission of the Republic of Korea. A review of interim financial informationconsists of making inquiries, primarily of persons responsible for financial and accounting matters, andapplying analytical and other review procedures. A review is substantially less in scope than an auditconducted in accordance with Korean Standards on Auditing and consequently does not enable us toobtain assurance that we would become aware of all significant matters that might be identified in an audit.Accordingly, we do not express an audit opinion.

ConclusionBased on our review, nothing has come to our attention that causes us to believe the accompanying interimconsolidated financial statements are not presented fairly, in all material respects, in accordance withKorean IFRS 1034 Interim Financial Reporting.

Other MattersWe have audited the consolidated statement of financial position of the Group as of December 31, 2016,and the related consolidated statements of comprehensive income, changes in equity and cash flows forthe year then ended, in accordance with Korean Standards on Auditing. We expressed an unqualifiedopinion on those financial statements, not presented herein, in our audit report dated March 8, 2017. Theconsolidated statement of financial position as of December 31, 2016, presented herein for comparativepurposes, is consistent, in all material respects, with the above audited statement of financial position as ofDecember 31, 2016.

Review standards and their application in practice vary among countries. The procedures and practicesused in the Republic of Korea to review such financial statements may differ from those generally acceptedand applied in other countries.

November 13, 2017Seoul, Korea

This report is effective as of November 13, 2017, the review report date. Certain subsequentevents or circumstances, which may occur between the review report date and the time of readingthis report, could have a material impact on the accompanying interim consolidated financialstatements and notes thereto. Accordingly, the readers of the review report should understand thatthere is a possibility that the above review report may have to be revised to reflect the impact ofsuch subsequent events or circumstances, if any.

2

Kookmin Bank and SubsidiariesInterim Consolidated Statements of Financial PositionSeptember 30, 2017 and December 31, 2016

(In millions of Korean won) Notes

AssetsCash and due from financial institutions 4,6,7,36 18,739,502 14,681,846

4,6,8,12 8,906,835 7,956,232Derivative financial assets 4,6,9 1,591,665 2,796,445Loans 4,6,8,10,11 247,995,401 236,551,052Financial investments 4,6,8,12 38,630,206 35,732,406

13 340,621 367,976Property and equipment 14 2,971,298 3,117,391Investment property 14 348,034 372,880Intangible assets 15 210,231 210,714Current income tax assets 32 13,905 11,937Deferred income tax assets 16,32 2,202 47,692Assets held for sale 18 173,860 26,527Other assets 4,6,17 6,683,504 5,193,272

Total assets 326,607,264 307,066,370

Liabilities4,6 72,215 73,238

Derivative financial liabilities 4,6,9 1,580,632 2,833,598Deposits 4,6,19 248,700,703 235,736,034Debts 4,6,20 17,776,492 15,934,409Debentures 4,6,21 18,511,721 14,959,692Provisions 22 401,147 425,284Net defined benefit liabilities 23 185,216 71,167Current income tax liabilities 32 2,652 5,357Deferred income tax liabilities 16,32 167,195 19Other liabilities 4,6,24,30 14,155,516 13,702,570

Total liabilities 301,553,489 283,741,368Equity 25

Capital stock 2,021,896 2,021,896Capital surplus 5,219,689 5,219,704Accumulated other comprehensive income 34 741,881 494,863Retained earnings 33 17,070,309 15,588,539(Provision of regulatory reserve for credit losses

September 30, 2017 : 2,001,063 million

December 31, 2016 : 1,835,115 million)(Amounts estimated to be appropriatedSeptember 30, 2017 : 141,477 millionDecember 31, 2016 : 165,948 million)

Equity attributable to the shareholder of the Parent Company 25,053,775 23,325,002Non-controlling interest equity - -Total equity 25,053,775 23,325,002Total liabilities and equity 326,607,264 307,066,370

Financial assets at fair value through profit or loss

Investments in associates

Financial liabilities at fair value through profit or loss

September 30, 2017(Unaudited)

December 31, 2016

The accompanying notes are an integral part of these interim consolidated financial statements.

3

Kookmin Bank and SubsidiariesInterim Consolidated Statements of Comprehensive IncomeThree-Month and Nine-Month Periods Ended September 30, 2017 and 2016

(Unaudited) (Unaudited)Notes

Interest income 2,117,606 6,127,258 1,974,657 5,903,216Interest expense (730,176) (2,154,751) (750,778) (2,373,584)Net interest income 26 1,387,430 3,972,507 1,223,879 3,529,632

Fee and commission income 371,486 1,090,690 334,249 979,372Fee and commission expense (62,356) (180,698) (53,797) (160,039)Net fee and commission income 27 309,130 909,992 280,452 819,333

28 40,797 109,986 (35,371) 18,961

Net other operating income(expenses) 29 (87,587) (283,624) 8,384 (44,697)

General and administrative expenses 14,15,23,30,40 (771,145) (2,416,172) (804,224) (2,549,863)

878,625 2,292,689 673,120 1,773,366

11,17,22 (76,501) (169,053) (125,569) (294,100)

Operating profit 802,124 2,123,636 547,551 1,479,266

Share of profit of associates 13 17,381 31,186 3,413 8,573Other non-operating income 31 3,330 39,080 9,262 32,845Net non-operating income 20,711 70,266 12,675 41,418

Profit before income tax expense 822,835 2,193,902 560,226 1,520,684

Income tax expense 32 (190,801) (352,639) (138,458) (355,730)

Profit for the period 632,034 1,841,263 421,768 1,164,954

25September 30, 2017 (Nine months) : 1,699,786 millionSeptember 30, 2017 (Three months) : 582,811 millionSeptember 30, 2016 (Nine months) : 1,011,751 millionSeptember 30, 2016 (Three months) : 475,352 million)

Other comprehensive incomeItems that will not be reclassified to profit or loss:Remeasurements of net defined benefit liabilities 23 (1,782) (7,490) (1,399) (5,805)

Currency translation differences 13,177 (7,322) (43,143) (51,445)Gain on valuation financial investments 587 169,423 11,215 129,104

(995) 89,494 124 (775)

(3,953) 1,046 8,554 7,2161,442 1,867 164 (175)

34 8,476 247,018 (24,485) 78,120

Total comprehensive income for the period 640,510 2,088,281 397,283 1,243,074

Profit attributable to:Shareholder of the parent company 632,034 1,841,263 421,768 1,164,954Non-controlling interests - - - -

632,034 1,841,263 421,768 1,164,954Total comprehensive income for the period attributable to:Shareholder of the parent company 640,510 2,088,281 397,283 1,243,074Non-controlling interests - - - -

640,510 2,088,281 397,283 1,243,074

Gain(Loss) on cash flow hedging instruments

Net gain(loss) on financial assets/liabilitiesat fair value through profit or loss

Operating profit before provision forcredit losses

Provision for credit losses

(Adjusted profit after provision of regulatoryreserve for credit losses

Share of other comprehensive income(loss) ofassociatesGain(Loss) on hedging instruments ofa net investments in a foreign operations

Other comprehensive income(loss) for theperiod net of tax

Items that may be reclassified subsequently toprofit or loss:

Period Ended September 302017 2016

(In millions of Korean won) Three months Nine months Three months Nine months


4

KookminBankandSubsidiaries

Interim

ConsolidatedStatementsofChangesinEquity

Nine-MonthPeriodsEndedSeptember30,2017and2016

Accumulated

Other

(InmillionsofKoreanwon)

Capital

Capital

Com

prehensive

Retained

Non-controlling

Total

Stock

Surplus

Income

Earnings

interests

Equity

BalanceatJanuary1,2016

2,021,896

5,219,704

500,807

15,004,804

-22,747,211

Com

prehensiveincomefortheperiod

Profitfortheperiod

--

-1,164,954

-1,164,954

Remeasurementsofnetdefinedbenefitliabilities

--

(5,805)

--

(5,805)

Currencytranslationadjustments

--

(51,445)

--

(51,445)

Gainonvaluationoffinancialinvestments

--

129,104

--

129,104

Shareofothercomprehensivelossofassociates

--

(775)

--

(775)

Gainonhedginginstrumentsofanetinvestment

inaforeignoperations

--

7,216

--

7,216

Lossoncashflowhedginginstruments

--

(175)

--

(175)

Totalcom


--

78,120

1,164,954

-1,243,074

Transactionswith

theshareholder

Dividends

--

-(380,521)

-(380,521)

Totaltransactionswith

theshareholder

--

-(380,521)

-(380,521)

BalanceatSeptember30,2016(Unaudited)

2,021,896

5,219,704

578,927

15,789,237

-23,609,764

BalanceatJanuary1,2017

2,021,896

5,219,704

494,863

15,588,539

-23,325,002

Com


Profitfortheperiod

--

-1,841,263

-1,841,263

Remeasurementsofnetdefinedbenefitliabilities

--

(7,490)

--

(7,490)

Currencytranslationadjustments

--

(7,322)

--

(7,322)

Gainonvaluationoffinancialinvestments

--

169,423

--

169,423

Shareofothercomprehensiveincomeofassociates

--

89,494

--

89,494

Gainonhedginginstrumentsofnetinvestments

inforeignoperations

--

1,046

--

1,046

Gainoncashflowhedginginstruments

--

1,867

--

1,867

Totalcom


--

247,018

1,841,263

-2,088,281

Transactionswith

theshareholder

Dividends

--

-(359,493)

-(359,493)

Changesinownershipinterestsinsubsidiaries

-(15)

--

-(15)

Totaltransactionswith

theshareholder

-(15)

-(359,493)

-(359,508)

BalanceatSeptember30,2017(Unaudited)

2,021,896

5,219,689

741,881

17,070,309

-25,053,775

AttributabletotheshareholderoftheParentCompany

Theaccompanyingnotesareanintegralpartoftheseinterim

consolidatedfinancialstatements.

5

Kookmin Bank and SubsidiariesInterim Consolidated Statements of Cash FlowsNine-Month Periods Ended September 30, 2017 and 2016

(In millions of Korean won) Notes

Cash flows from operating activitiesProfit for the period 1,841,263 1,164,954Adjustment for non-cash items

Net loss(gain) on financial assets/liabilities at fair valuethrough profit or loss (20,965) 13,966Net gain on derivative financial investmentsfor hedging purposes (16,059) (30,509)Adjustment of fair value of derivative financial instruments (683) (1,156)Provision for credit losses 169,053 294,100Net loss(gain) on financial investments 28,799 (152,059)Share of profit of associates (31,186) (8,573)Depreciation and amortization expense 161,688 150,087Other net loss on property and equipment/intangible assets 18,451 4,276Share-based payment 22,432 11,418Post-employment benefits 107,580 120,317Net interest income 231,895 236,266Loss on foreign currency translation (186,478) (62,196)Other expenses 66,240 62,960

550,767 638,897Changes in operating assets and liabilities

Financial assets at fair value through profit or loss (960,982) (920,905)Derivative financial instrument 65 (12,484)Loans (12,098,035) (11,584,475)Current income tax assets (1,969) 3,112Deferred income tax assets 45,510 4,037Other assets (5,421,613) (651,326)Financial liabilities at fair value through profit or loss (1,023) (2,027)Deposits 13,168,361 9,410,221Deferred income tax liabilities 114,404 (48,135)Other liabilities (995,387) 3,671,964

(6,150,669) (130,018)Net cash inflow(outflow) from operating activities (3,758,639) 1,673,833

Cash flows from investing activities

1,804 -Disposal of financial investments 25,787,200 21,191,288Acquisition of financial investments (28,632,795) (23,530,709)Disposal of investments in associates 79,064 58,474Acquisition of investments in associates (19,654) (17,727)Disposal of property and equipment (15) 570Acquisition of property and equipment (129,982) (162,058)Acquisition of investment property (256) (1,085)Disposal of intangible assets 487 3,110Acquisition of intangible assets (32,244) (44,568)Others 175,539 17,933

Net cash outflow from investing activities (2,770,852) (2,484,772)

Cash flows from financing activities

923 27,140Net increase(decrease) in debts 2,111,393 (167,022)Increase in debentures 10,771,534 4,304,906Decrease in debentures (7,082,385) (3,957,573)Payment of dividends (359,493) (380,521)Net increase in other payables from trust accounts 1,162,753 1,271,534Others (8,602) (29,380)

Net cash inflow from financing activities 6,596,123 1,069,084

Exchange gain(loss) on cash and cash equivalents (61,846) 54,508Net increase in cash and cash equivalents 4,786 312,653Cash and cash equivalents at the beginning of the period 36 6,338,158 6,469,506Cash and cash equivalents at the end of the period 36 6,342,944 6,782,159

Net cash flows from derivative financial instrumentfor hedging purposes

Net cash flows from derivative financial instrumentfor hedging purposes

Nine-Month Period Ended September 30

(Unaudited) (Unaudited)2017 2016


6

Kookmin Bank and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2017 and 2016 (Unaudited), and December 31, 2016

1. The Bank

Kookmin Bank (the “Bank”) was incorporated in 1963 under the Citizens National Bank Act to providebanking services to the general public and to small and medium-sized enterprises. Pursuant to theRepeal Act of the Citizens National Bank Act, effective January 5, 1995, the Bank’s status changed toa financial institution which operates under the Banking Act and Commercial Act.

The Bank merged with Korea Long Term Credit Bank on December 31, 1998, and with itssubsidiaries, Daegu, Busan, Jeonnam Kookmin Mutual Savings & Finance Co., Ltd., on August 22,1999. Pursuant to the directive from the Financial Services Commission related to the StructuralImprovement of the Financial Industry Act, the Bank acquired certain assets, including performingloans, and assumed most of the liabilities of Daedong Bank on June 29, 1998. Also, the Bankcompleted the merger with Housing and Commercial Bank (“H&CB”) on October 31, 2001, andmerged with Kookmin Credit Card Co., Ltd., a majority-owned subsidiary, on September 30, 2003.Meanwhile, the Bank spun off its credit card business segment on February 28, 2011, and KBKookmin Card Co., Ltd. became a subsidiary of KB Financial Group Inc.

The Bank listed its shares on the Stock Market Division of the Korea Exchange (“KRX,” formerlyKorea Stock Exchange) in September 1994. As a result of the merger with H&CB, the shareholder ofthe former Kookmin Bank and H&CB received new common shares of the Bank which were relistedon the KRX on November 9, 2001. In addition, H&CB listed its American Depositary Shares (“ADS”)on the New York Stock Exchange (“NYSE”) on October 3, 2000, prior to the merger. Following themerger with H&CB, the Bank listed its ADS on the NYSE on November 1, 2001. The Bank became awholly owned subsidiary of KB Financial Group Inc. through a comprehensive stock transfer onSeptember 29, 2008. Subsequently, the Bank’s shares and its ADS, each listed on the KRX and theNYSE, were delisted on October 10, 2008 and September 26, 2008, respectively. As of September30, 2017, the Bank’s paid-in capital is 2,021,896 million.

The Bank engages in the banking business in accordance with the Banking Act, trust business inaccordance with the Financial Investment Services and Capital Markets Act, and other relevantbusinesses. As of September 30, 2017, the Bank operates 1,062 domestic branches and offices, andfive overseas branches (excluding five subsidiaries and three offices).

7


2. Basis of Preparation

2.1 Application of Korean IFRS

The Group maintains its accounting records in Korean won and prepares statutory financialstatements in the Korean language (Hangul) in accordance with Korean IFRS. The accompanyinginterim consolidated financial statements have been condensed, restructured and translated intoEnglish from the Korean language financial statements.

The interim consolidated financial statements of the Bank and its subsidiaries (collectively the“Group”) have been prepared in accordance with Korean IFRS. These are the standards and relatedinterpretations issued by the International Accounting Standards Board (“IASB”) that have beenadopted by the Republic of Korea.

The preparation of the interim consolidated financial statements requires the use of certain criticalaccounting estimates. It also requires management to exercise judgment in the process of applyingthe Group’s accounting policies. The areas involving a higher degree of judgment or complexity, orareas where assumptions and estimates are significant to the interim consolidated financialstatements are disclosed in Note 2.4.

The Group’s interim consolidated financial statements for the nine-month period ended September30, 2017, have been prepared in accordance with Korean IFRS 1034 Interim Financial Reporting.These interim consolidated financial statements have been prepared in accordance with Korean IFRSstandards issued and early adopted at the end of the reporting period.

The Group newly applied the following amended and enacted standards and interpretations for theannual period beginning on January 1, 2017, and this application does not have a material impact onthe interim consolidated financial statements.

- Amendments to Korean IFRS 1007 Statement of Cash Flows- Amendments to Korean IFRS 1012 Income Tax- Amendments to Korean IFRS 1112 Disclosure of Interests in Other Entities: Exemption forconsolidation of investee

Also, new standards and interpretations issued but not effective for the financial period beginningJanuary 1, 2017, and not early adopted are as follows:

- Amendments to Korean IFRS 1028 Investments in Associates and Joint Ventures

When an investment in an associate or a joint venture is held by, or it held indirectly through, an entitythat is a venture capital organization, or a mutual fund and similar entities, the entity may elect tomeasure that investment at fair value through profit or loss. The amendments clarify that an entityshall make this election separately for each associate of joint venture, at initial recognition of theassociate or joint venture. The Group will apply these amendments retrospectively for annual periodsbeginning on or after January 1, 2018, and early adoption is permitted. The Group does not expectthe amendments to have a significant impact on the consolidated financial statements.

8


- Amendments to Korean IFRS 1102 Share-based Payment

This amendment clarifies accounting for a modification to the terms and conditions of a share-basedpayment that changes the classification of the transaction from cash-settled to equity-settled. Also,clarifies that the measurement approach should treat the terms and conditions of a cash-settledaward in the same way as for an equity-settled award. The Group will apply the amendments forannual periods beginning on or after January 1, 2018 with early application permitted. The Groupdoes not expect the amendment to have a significant impact on the consolidated financial statements.

- Enactments of Interpretation 2122 Foreign Currency Transactions and Advance Consideration

According to these enactments, the date of the transaction for the purpose of determining theexchange rate to use on initial recognition of the related asset, expense or income (or part of it) is thedate on which an entity initially recognizes the non-monetary asset or non-monetary liability arisingfrom the payment or receipt of advance consideration. If there are multiple payments or receipts inadvance, the entity shall determine a date of the transaction for each payment or receipt of advanceconsideration. These enactments will be effective for annual periods beginning on or after January 1,2018, with early adoption permitted. The Group does not expect the enactments to have a significantimpact on the consolidated financial statements.

- Korean IFRS 1109 Financial Instruments

The new standard for financial instruments issued on September 25, 2015 is effective for annualperiods beginning on or after January 1, 2018 with early application permitted. This standard willreplace Korean IFRS 1039 Financial Instruments: Recognition and Measurement. The Group willapply the standards for annual periods beginning on or after January 1, 2018.

The standard requires retrospective application with some exceptions. For example, the entity is notrequired to restate prior periods in relation to classification and measurement (including impairment)of financial instruments. The standard requires prospective application of its hedge accountingrequirements for all hedging relationships except the accounting for time value of options and otherexceptions.

Korean IFRS 1109 Financial Instruments requires all financial assets to be classified and measuredon the basis of the entity’s business model for managing financial assets and the contractual cashflow characteristics of the financial assets. A new impairment model, an expected credit loss model, isintroduced and any subsequent changes in expected credit losses will be recognized in profit or loss.Also, hedge accounting rules amended to extend the hedging relationship, which consists only ofeligible hedging instruments and hedged items, qualifies for hedge accounting.

An effective implementation of Korean IFRS 1109 requires preparation processes including financialimpact assessment, accounting policy establishment, accounting system development and thesystem stabilization. The impact on the Group’s financial statements due to the application of thestandard is dependent on judgements made in applying the standard, financial instruments held bythe Group and macroeconomic variables.

9


Within the Group, Korean IFRS 1109 Task Force Team ('TFT') has been set up to prepare forimplementation of Korean IFRS 1109 since October 2015. There are three stages for implementationof Korean IFRS, such as analysis, design and implementation, and preparation for application. TheGroup is analyzing financial impacts of Korean IFRS 1109 on its consolidated financial statements.

The Group performed an impact assessment to identify potential financial effects of applying KoreanIFRS 1109. The assessment was performed based on retainable information as of June 30, 2017,and the results of the assessment are explained as below. The Group plans to perform more detailedanalysis on financial effects base on additional information in the future; therefore, the results of theassessment may change due to additional information that the Group may obtain after theassessment.

(a) Classification and Measurement of Financial Assets

When implementing Korean IFRS 1109, the classification of financial assets will be driven by theGroup’s business model for managing the financial assets and contractual terms of cash flow. Thefollowing table shows the classification of financial assets measured subsequently at amortized cost,at fair value through other comprehensive income and at fair value through profit or loss. If a hybridcontract contains a host that is a financial asset, the classification of the hybrid contract shall bedetermined for the entire contract without separating the embedded derivative.

Business modelContractual cash flows characteristics

Solely represent payments ofprincipal and interest All other

Hold the financial assetfor the collection of thecontractual cash flows

Measured at amortized cost 1

Recognized at fair valuethrough profit or loss 2

Hold the financial assetfor the collection of thecontractual cash flowsand trading

Recognized at fair value throughother comprehensive income 1

Hold for trading Recognized at fair value throughprofit or loss

1 A designation at fair value through profit or loss is allowed only if such designation mitigates anaccounting mismatch (irrevocable).

2 Equity investments not held for trading can be recorded in other comprehensive income (irrevocable).

Stage Period Process

1 From Oct. to Dec. 2015(for 3 months)

Analysis of GAAP differences and development ofmethodology

2 From Jan. to Dec. 2016(for 12 months)

Development of methodology, definition of businessrequirement, and the system development and test.

3From Jan. 2017to Mar. 2018(for 15 months)

Preparation for opening balances of the financial statements

10


With the implementation of Korean IFRS 1109, the criteria to classify the financial assets at amortizedcost or at fair value through other comprehensive income are more strictly applied than the criteriaapplied with Korean IFRS 1039. Accordingly, the financial assets at fair value through profit or loss mayincrease by implementing Korean IFRS 1109 and may result in an increased fluctuation in profit or loss.

According to Korean IFRS 1109, debt securities those contractual cash flows do not represent solelypayments of principal and interest and held for trading, and equity securities that are not designatedas instruments measured at fair value through other comprehensive income are measured at fairvalue through profit or loss. As of June 30, 2017, the Group holds debt securities, equity securitiesand other financial assets classified as financial assets at fair value through profit or loss that amountto 8,501,216 million, 155,387 million and 208,390 million, respectively.

Based on results from the impact assessment, if the Group applies Korean IFRS 1109 to the financialassets measured at fair value through profit or loss as of June 30, 2017, the application will not havea material impact on the financial statements because the majority of the financial assets will still beclassified as at fair value through profit or loss.

According to Korean IFRS 1109, a debt security is measured at fair value through othercomprehensive income if the objective of the business model is achieved both by collectingcontractual cash flows and selling financial assets; and the contractual cash flows represents solelypayments of principal and interest on a specific date under contract terms. As of June 30, 2017, theGroup holds debt securities and beneficiary securities of 26,289,316 million classified as financialassets available-for-sale.

Based on results from the impact assessment of Korean IFRS 1109, if Korean IFRS 1109 is appliedfor the above debt securities classified as financial assets available-for-sale, the Group expects themajority of the financial assets to be measured at fair value through other comprehensive income.Meanwhile, the beneficiary securities amounting to 3,994,282 million which of the contractual cashflows under the instrument do not solely represent payments of principal and interest on the principalamount, are measured at fair value through profit or loss, accordingly, the Group expects volatility inprofit or loss may be increased.

According to Korean IFRS 1109, equity securities that are not held for trading, the Group can makean irrevocable election at initial recognition to classify the instruments as assets measured at fairvalue through other comprehensive income, which all subsequent changes in fair value beingrecognized in other comprehensive income and not recycled to profit or loss. As of June 30, 2017, theGroup holds equity securities of 2,034,962 million classified as financial assets available-for-sale.

Based on results from the impact assessment of Korean IFRS 1109, the Group plans to designatemost equity securities as instruments measured at fair value through profit or loss except some equityinstruments, which are classified in financial assets available-for-sale, held for business agreementand investment purpose. Therefore, the Group expects the application of Korean IFRS 1109 on thesefinancial assets may increase volatility in profit or loss.

According to Korean IFRS 1109, a debt instrument is measured at amortized cost if: a) the objective ofthe business model is to hold the financial asset for the collection of the contractual cash flows, and b)the contractual cash flows under the instrument solely represent payments of principal and interest. Asof June 30, 2017, the Group measured loans and receivables of 242,661,130 million, cash and duefrom financial institutions of 15,237,433 million and financial assets held-to-maturity of 8,849,879million at amortized costs.

11


Based on results from the impact assessment, if the Group applies Korean IFRS 1109 to the abovefinancial assets, the application will not have a material impact on the financial statements. This isbecause the Group holds the majority of financial assets measured at amortized cost that meets theboth criteria: a) the objective of the business model is to hold the financial asset for the collection ofthe contractual cash flows, and b) the contractual cash flows under the instrument solely representpayments of principal and interest, although loans with conversion right and a part of due fromfinancial institutions which of contractual cash flows do not represent solely payments of principal andinterest are recognized at fair value through profit or loss.

(b) Classification and Measurement of Financial Liabilities

Korean IFRS 1109 requires the amount of the change in the liability’s fair value attributable tochanges in the credit risk to be recognized in other comprehensive income, unless this treatment ofthe credit risk component creates or enlarges a measurement mismatch. Amounts presented in othercomprehensive income are not subsequently transferred to profit or loss.

Based on results from the impact assessment of Korean IFRS 1109, the Group expects that theapplication will have no impact on the financial statements because the Group had no financialliabilities designated as at fair value through profit or loss as of June 30, 2017.

(c) Impairment: Financial Assets and Contract Assets

Korean IFRS 1109 sets out a new forward looking ‘expected loss’ impairment model which replacesthe incurred loss model under Korean IFRS 1039 that impaired assets if there is an objectiveevidence and applies to:

- Financial assets measured at amortized cost,- Debt investments measured at fair value through other comprehensive income- Lease receivables, and- Certain loan commitments and financial guaranteed contracts.

Under Korean IFRS 1109 ‘expected loss’ model, a credit event (or impairment ‘trigger’) no longer hasto occur before credit losses are recognized. The Group will always recognize (at a minimum) 12-month expected credit losses in profit or loss. Lifetime expected losses will be recognized on assetsfor which there is a significant increase in credit risk after initial recognition.

Stage Loss allowance

1 No significant increase in creditrisk after initial recognition

12-month expected credit losses (expected credit lossesthat result from those default events on the financialinstrument that are possible within 12 months after thereporting date)

2 Significant increase in credit riskafter initial recognition

Lifetime expected credit losses (expected credit lossesthat result from all possible default events over the life ofthe financial instrument)3 Credit-impaired

Under Korean IFRS 1109, the asset that is credit-impaired at initial recognition would recognize allchanges in lifetime expected credit losses since the initial recognition as a loss allowance with anychanges recognized in profit or loss.

12


Based on results from the impact assessment, the balances subject to loss allowances and the lossallowance amounts under Korean IFRS 1109 as of June 30, 2017 were as follows:

(In millions of Korean won) Carrying amount

BalanceLoss allowance in accordance

with Korean IFRS 1109Loans 1 Stage 1 221,565,485 301,514

Stage 2 20,183,037 308,081Stage 3 1,695,315 934,134

Debt securities / Due fromFinancial Institutions 42,031,940 6,490

285,475,777 1,550,219

1 Balance includes other liabilities.

Based on results from the impact assessment, the amount of the provisions under Korean IFRS 1109as of June 30, 2017 were as follows:

(In millions of Korean won) Carrying amountLoss allowance in accordance

with Korean IFRS 1109Provisions Stage 1 100,797

Stage 2 55,703Stage 3 21,342

177,842

Based on results from the impact assessment, the Bank estimated that equity capital ratio inaccordance with Basel standards will be decreased by 0.05%p from 16.54% to 16.49%.

The results of the assessment may be changed due to additional information that the Group mayobtain after the assessment and related decisions.

(d) Hedge Accounting

Hedge accounting mechanics (fair value hedges, cash flow hedges and hedge of net investments in aforeign operations) required by Korean IFRS 1039 remains unchanged in Korean IFRS 1109,however, the new hedge accounting rules will align the accounting for hedging instruments moreclosely with the Group’s risk management practices. As a general rule, more hedge relationshipsmight be eligible for hedge accounting, as the standard introduces a more principles-based approach.Korean IFRS 1109 allows more hedging instruments and hedged items to qualify for hedgeaccounting, and relaxes the hedge accounting requirement by removing two hedge effectivenesstests that are a prospective test to ensure that the hedging relationship is expected to be highlyeffective and a quantitative retrospective test (within range of 80-125 %) to ensure that the hedgingrelationship has been highly effective throughout the reporting period.

With implementation of Korean IFRS 1109, volatility in profit or loss may be reduced as some itemsthat were not eligible as hedged items or hedging instruments under Korean IFRS 1039 are noweligible under Korean IFRS 1109.

13


As of June 30, 2017, the Group applies the hedge accounting to its assets and liabilities that amountto 5,363,324 million. With applying the hedge accounting, the Group recognized the changes in fairvalue of fair value hedging instruments for 20,575 million in loss, and reclassified the fair valuechanges of cash flow hedging instruments amounting to 31 million, which were previouslyrecognized in other comprehensive income, to loss. As of June 30, 2017, the changes in fair values ofcash flow hedging instruments and hedging instruments of a net investments in a foreign operationswhich have been recognized in accumulated other comprehensive income, amount to 1,005 millionand 36,009 million, respectively.

Furthermore, when the Group first applies Korean IFRS 1109, it may choose as its accounting policyto continue to apply all of the hedge accounting requirements of Korean IFRS 1039 instead of therequirements of Korean IFRS 1109.

- Korean IFRS 1115 Revenue from Contracts with Customers

Korean IFRS 1115 Revenue from Contracts with Customers issued on November 6, 2015 replacesKorean IFRS 1018 Revenue, Korean IFRS 1011 Construction Contracts, Interpretation 2031Revenue-Barter Transactions Involving Advertising Services, Interpretation 2113 Customer LoyaltyPrograms, Interpretation 2115 Agreements for the Construction of Real Estate and Interpretation 2118Transfers of assets from customers.

Korean IFRS 1018 and other, the current standard, provide revenue recognition criteria by type oftransactions; such as, sales goods, the rendering of services, interest income, royalty income,dividend income, and construction contracts. However, Korean IFRS 1115, the new standard, isbased on the principle that revenue is recognized when control of a good or service transfers to acustomer – so the notion of control replaces the existing notion of risks and rewards. A new five-stepprocess must be applied before revenue from contract with customer can be recognized:

- Identify contracts with customers- Identify the separate performance obligation- Determine the transaction price of the contract- Allocate the transaction price to each of the separate performance obligations, and- Recognize the revenue as each performance obligation is satisfied.

The new standard is effective for annual periods beginning on or after January 1, 2018 with earlyapplication permitted.

2.2 Measurement Basis

The interim consolidated financial statements have been prepared under the historical costconvention unless otherwise specified.

2.3 Functional and Presentation Currency

Items included in the financial statements of each of the Group's entities are measured using thecurrency of the primary economic environment in which the entity operates (the “functional currency”).The interim consolidated financial statements are presented in Korean won, which is the parentcompany’s functional and presentation currency. Refer to Notes 3.2

14


2.4 Critical Accounting Estimates

The preparation of interim consolidated financial statements requires the application of accountingpolicies, certain critical accounting estimates and assumptions that may have a significant impact onthe assets (liabilities) and incomes (expenses). Management’s estimates of outcomes may differ fromactual outcomes if management’s estimates and assumptions based on management’s bestjudgment at the reporting date are different from the actual environment.

Estimates and assumptions are continually evaluated and any change in an accounting estimate isrecognized prospectively by including it in profit or loss in the period of the change, if the changeaffects that period only. Alternatively if the change in accounting estimate affects both the period ofchange and future periods, that change is recognized in the profit or loss of all those periods.

Uncertainty in estimates and assumptions with significant risk that may result in material adjustmentto the interim consolidated financial statements are as follows:

2.4.1 Income Taxes

The Group is operating in numerous countries and the income generated from these operations issubject to income taxes based on tax laws and interpretations of tax authorities in numerousjurisdictions. There are many transactions and calculations for which the ultimate tax determination isuncertain.

If a certain portion of the taxable income is not used for investments, increase in wages, or dividendsin accordance with the Tax System For Recirculation of Corporate Income, the Group is liable to payadditional income tax calculated based on the tax laws. The new tax system is effective for threeyears from 2015. Accordingly, the measurement of current and deferred income tax is affected by thetax effects from the new system. As the Group’s income tax is dependent on the investments,increase in wages and dividends, there exists uncertainty with regard to measuring the final taxeffects.

2.4.2 Fair Value of Financial Instruments

The fair value of financial instruments that are not traded in an active market is determined by usingvaluation techniques. The Group uses its judgment to select a variety of methods and makeassumptions that are mainly based on market conditions existing at the end of each reporting period.Refer to Note 6 for details on valuation techniques and inputs used to determine the fair value offinancial instruments.

2.4.3 Provisions for Credit Losses (allowances for loan losses, provisions for acceptances andguarantees, and unused loan commitments)

The Group determines and recognizes allowances for losses on loans through impairment testing andrecognizes provisions for guarantees, and unused loan commitments. The accuracy of provisions forcredit losses is determined by the methodology and assumptions used for estimating expected cashflows of the borrower for individually assessed allowances of loans, collectively assessed allowancesfor groups of loans, guarantees and unused loan commitments.

15


2.4.4 Net Defined Benefit Liability

The present value of net defined benefit liability depends on a number of factors that are determinedon an actuarial basis using a number of assumptions (Note 23).

2.4.5 Estimated Impairment of Goodwill

The Group tests annually whether goodwill has suffered any impairment. The recoverable amounts ofcash-generating units have been determined based on value-in-use calculations (Note 15).

3. Significant Accounting Policies

The significant accounting policies applied in the preparation of these interim consolidated financialstatements are set out below. These policies have been consistently applied to all periods presented,unless otherwise stated.

3.1 Consolidation

3.1.1 Subsidiaries

Subsidiaries are companies that are controlled by the Group. The Group controls an investee when itis exposed, or has rights, to variable returns from its involvement with the investee and has the abilityto affect those returns through its power over the investee. The existence and effects of potentialvoting rights that are currently exercisable or convertible are considered when assessing whether theGroup controls another entity. Subsidiaries are fully consolidated from the date when control istransferred to the Group and de-consolidated from the date when control is lost.

If a subsidiary uses accounting policies other than those adopted in the interim consolidated financialstatements for like transactions and events in similar circumstances, appropriate adjustments aremade to make the subsidiary’s accounting policies conform to those of the Group when thesubsidiary’s financial statements are used by the Group in preparing the interim consolidated financialstatements.

Profit or loss and each component of other comprehensive income are attributed to the owners of theparent and to the non-controlling interests, if any. Total comprehensive income is attributed to theowners of the parent and to the non-controlling interests even if this results in the non-controllinginterests having a deficit balance.

Transactions with non-controlling interests that do not result in loss of control are accounted for asequity transactions; that is, as transactions with the owners in their capacity as owners. Thedifference between fair value of any consideration paid and the relevant share acquired of thecarrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals tonon-controlling interests are also recorded in equity.

16


When the Group ceases to have control, any retained interest in the entity is re-measured to its fairvalue at the date when control is lost, with the change in carrying amount recognized in profit or loss.The fair value is the initial carrying amount for the purposes of subsequently accounting for theretained interest as an associate, joint venture or financial asset. In addition, any amounts previouslyrecognized in other comprehensive income in respect of that entity are accounted for as if the Grouphad directly disposed of the related assets or liabilities. This may mean that amounts previouslyrecognized in other comprehensive income are reclassified to profit or loss.

3.1.2 Associates

Associates are entities over which the Group has significant influence in the financial and operatingpolicy decisions. If the Group holds 20% or more of the voting power of the investee, it is presumedthat the Group has significant influence.

Under the equity method, investments in associates are initially recognized at cost and the carryingamount is increased or decreased to recognize the Group’s share of the profit or loss of the investeeand changes in the investee’s equity after the date of acquisition. The Group’s share of the profit orloss of the investee is recognized in the Group’s profit or loss. Distributions received from an investeereduce the carrying amount of the investment. Profit and loss resulting from ‘upstream’ and‘downstream’ transactions between the Group and associates are eliminated to the extent at theGroup’s interest in associates. Unrealized losses are eliminated in the same way as unrealized gainsexcept that they are only eliminated to the extent that there is no evidence of impairment.

If associates use accounting policies other than those adopted in the interim consolidated financialstatements for like transactions and events in similar circumstances, appropriate adjustments aremade to make the associate’s accounting policies conform to those of the Group when theassociate’s financial statements are used by the Group in applying equity method.

After the carrying amount of the investment is reduced to zero, additional losses are provided for, anda liability is recognized, only to the extent that the Group has incurred legal or constructive obligationsor made payments on behalf of the investee.

The Group determines at each reporting period whether there is any objective evidence that theinvestments in the associates are impaired. If this is the case, the Group calculates the amount ofimpairment as the difference between the recoverable amount of the associates and its carrying valueand recognizes the amount as ‘non-operating income(expense)’ in the statement of comprehensiveincome.

3.1.3 Structured Entity

A structured entity is an entity that has been designed so that voting or similar rights are not thedominant factor in deciding who controls the entity. When the Group decides whether it has power tothe structured entities in which the Group has interests, it considers factors such as the purpose, theform, the practical ability to direct the relevant activities of a structured entity, the nature of itsrelationship with a structured entity and the amount of exposure to variable returns.

17


3.1.4 Trusts and Funds

The Group provides management services for trust assets, collective investment and other funds.These trusts and funds are not consolidated in the Group’s interim consolidated financial statements,except for trusts and funds over which the Group has control.

3.1.5 Intra-group Transactions

All intra-group balances and transactions, and any unrealized gains arising on intra-grouptransactions, are eliminated in preparing the interim consolidated financial statements. Unrealizedlosses are eliminated in the same way as unrealized gains except that they are only eliminated to theextent that there is no evidence of impairment.

3.2 Foreign Currency

3.2.1 Foreign Currency Transactions and Balances

A foreign currency transaction is recorded, on initial recognition in the functional currency, by applyingthe spot exchange rate between the functional currency and the foreign currency at the date of thetransaction. At the end of each reporting period, foreign currency monetary items are translated usingthe closing rate which is the spot exchange rate at the end of the reporting period. Non-monetaryitems that are measured at fair value in a foreign currency are translated using the spot exchangerates at the date when the fair value was determined and non-monetary items that are measured interms of historical cost in a foreign currency are translated using the spot exchange rate at the date ofthe transaction. Exchange differences arising on the settlement of monetary items or on translatingmonetary items at rates different from those at which they were translated on initial recognition duringthe period or in previous financial statements are recognized in profit or loss in the period in whichthey arise, except for exchange differences arising on net investments in a foreign operation andfinancial liability designated as a hedge of the net investment. When gains or losses on a non-monetary item are recognized in other comprehensive income, any exchange component of thosegains or losses are also recognized in other comprehensive income. Conversely, when gains orlosses on a non-monetary item are recognized in profit or loss, any exchange component of thosegains or losses are also recognized in profit or loss.

3.2.2 Foreign Operations

The financial performance and financial position of all foreign operations, whose functional currenciesdiffer from the Group’s presentation currency, are translated into the Group’s presentation currencyusing the following procedures.

Assets and liabilities for each consolidated statement of financial position presented are translated atthe closing rate at the end of the reporting period. Income and expenses in the statement ofcomprehensive income presented are translated at average exchange rates for the period. Allresulting exchange differences are recognized in other comprehensive income.

Any goodwill arising from the acquisition of a foreign operation and any fair value adjustments to thecarrying amounts of assets and liabilities arising from the acquisition of that foreign operation aretreated as assets and liabilities of the foreign operation. Thus, they are expressed in the functionalcurrency of the foreign operation and are translated into the presentation currency at the closing rate.

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On the disposal of a foreign operation, the cumulative amount of the exchange differences relating tothat foreign operation, recognized in other comprehensive income and accumulated in the separatecomponent of equity, is reclassified from equity to profit or loss (as a reclassification adjustment)when the gains or losses on disposal are recognized. On the partial disposal of a subsidiary thatincludes a foreign operation, the Group re-attributes the proportionate share of the cumulative amountof the exchange differences recognized in other comprehensive income to the non-controllinginterests in that foreign operation. In any other partial disposal of a foreign operation, the Groupreclassifies to profit or loss only the proportionate share of the cumulative amount of the exchangedifferences recognized in other comprehensive income.

3.3 Recognition and Measurement of Financial Instruments

3.3.1 Initial Recognition

The Group recognizes a financial asset or a financial liability in its consolidated statement of financialposition when the Group becomes a party to the contractual provisions of the instrument. A regularway purchase or sale of financial assets (a purchase or sale of a financial asset under a contractwhose terms require delivery of the financial instruments within the time frame established generallyby market regulation or practice) is recognized and derecognized using trade date accounting.

The Group classifies financial assets as financial assets at fair value through profit or loss, available-for-sale financial assets, held-to-maturity financial assets, or loans and receivables, or other financialassets. The Group classifies financial liabilities as financial liabilities at fair value through profit or loss,or other financial liabilities. The classification depends on the nature and holding purpose of thefinancial instrument at initial recognition in the interim consolidated financial statements.

At initial recognition, a financial asset or financial liability is measured at its fair value plus or minus, inthe case of a financial asset or financial liability not at fair value through profit or loss, transactioncosts that are directly attributable to the acquisition or issue of the financial asset or financial liability.The fair value is defined as the price that would be received to sell an asset or paid to transfer aliability in an orderly transaction between market participants. The fair value of a financial instrumenton initial recognition is normally the transaction price (that is, the fair value of the consideration givenor received) in an arm’s length transaction.

3.3.2 Subsequent Measurement

After initial recognition, financial instruments are measured at amortized cost or fair value based onclassification at initial recognition.

Amortized cost

The amortized cost of a financial asset or financial liability is the amount at which the financial assetor financial liability is measured at initial recognition and adjusted to reflect principal repayments,cumulative amortization using the effective interest method and any reduction (directly or through theuse of an allowance account) for impairment or uncollectibility.

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Fair value

Fair values, which the Group primarily uses for the measurement of financial instruments, are thepublished price quotations based on market prices or dealer price quotations of financial instrumentstraded in an active market where available. These are the best evidence of fair value. A financialinstrument is regarded as quoted in an active market if quoted prices are readily and regularlyavailable from an exchange, dealer, broker, an entity in the same industry, pricing service orregulatory agency, and those prices represent actual and regularly occurring market transactions onan arm's length basis.

If the market for a financial instrument is not active, fair value is determined either by using avaluation technique or independent third-party valuation service. Valuation techniques include usingrecent arm's length market transactions between knowledgeable, willing parties, if available,referencing to the current fair value of another instrument that is substantially the same, discountedcash flow analysis and option pricing models.

The Group uses valuation models that are commonly used by market participants and customized forthe Group to determine fair values of common over-the-counter (OTC) derivatives such as options,interest rate swaps and currency swaps which are based on the inputs observable in markets. Formore complex instruments, the Group uses internally developed models, which are usually based onvaluation methods and techniques generally used within the industry, or a value measured by anindependent external valuation institution as the fair values if all or some of the inputs to the valuationmodels are not market observable and therefore it is necessary to estimate fair value based oncertain assumptions.

The Group’s Fair Value Evaluation Committee, which consists of the risk management department,trading department and accounting department, reviews the appropriateness of internally developedvaluation models, and approves the selection and changing of the external valuation institution andother considerations related to fair value measurement. The review results on the fair valuationmodels are reported to the Market Risk Management subcommittee by the Fair Value EvaluationCommittee on a regular basis.

If the valuation technique does not reflect all factors which market participants would consider insetting a price, the fair value is adjusted to reflect those factors. Those factors include counterpartycredit risk, bid-ask spread, liquidity risk and others.

The chosen valuation technique makes maximum use of market inputs and relies as little as possibleon entity-specific inputs. It incorporates all factors that market participants would consider in setting aprice and is consistent with economic methodologies applied for pricing financial instruments.Periodically, the Group calibrates the valuation technique and tests its validity using prices ofobservable current market transactions of the same instrument or based on other relevant observablemarket data.

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3.3.3 Derecognition

Derecognition is the removal of a previously recognized financial asset or financial liability from thestatement of financial position. The Group derecognizes a financial asset or a financial liability when,and only when:

Derecognition of financial assets

Financial assets are derecognized when the contractual rights to the cash flows from the financialassets expire or the financial assets have been transferred and substantially all the risks and rewardsof ownership of the financial assets are also transferred, or all the risks and rewards of ownership ofthe financial assets are neither substantially transferred nor retained and the Group has not retainedcontrol. If the Group neither transfers nor disposes of substantially all the risks and rewards ofownership of the financial assets, the Group continues to recognize the financial asset to the extent ofits continuing involvement in the financial asset.

If the Group transfers the contractual rights to receive the cash flows of the financial asset, but retainssubstantially all the risks and rewards of ownership of the financial asset, the Group continues torecognize the transferred asset in its entirely and recognize a financial liability for the considerationreceived.

Derecognition of financial liabilities

Financial liabilities are derecognized from the statement of financial position when the obligationspecified in the contract is discharged, cancelled or expires.

3.3.4 Offsetting

A financial asset and a financial liability are offset and the net amount presented in the statement offinancial position when, and only when, the Group currently has a legally enforceable right to offsetthe recognized amounts and intends either to settle on a net basis, or to realize the asset and settlethe liability simultaneously.

3.4 Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, foreign currency, and short-term, highly liquidinvestments that are readily convertible to known amounts of cash and which are subject to aninsignificant risk of changes in value.

3.5 Non-derivative Financial Assets

3.5.1 Financial Assets at Fair Value through Profit or Loss

This category comprises two sub-categories: financial assets classified as held for trading andfinancial assets designated by the Group as at fair value through profit or loss upon initial recognition.

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A non-derivative financial asset is classified as held for trading if either:

- It is acquired for the purpose of selling in the near term, or- It is part of a portfolio of identified financial instruments that are managed together and for whichthere is evidence of a recent actual pattern of short-term profit-taking.

The Group may designate certain financial assets, other than held for trading, upon initial recognitionas at fair value through profit or loss when one of the following conditions is met:

- It eliminates or significantly reduces a measurement or recognition inconsistency (sometimesreferred to as 'an accounting mismatch') that would otherwise arise from measuring assets orliabilities or recognizing the gains and losses on them on different bases.- A group of financial assets is managed and its performance is evaluated on a fair value basis, inaccordance with a documented risk management or investment strategy, and information about thegroup is provided internally on that basis to the Group's key management personnel.- A contract contains one or more embedded derivatives; the Group may designate the entire hybrid(combined) contract as a financial asset at fair value through profit or loss if allowed by Korean IFRS1039 Financial Instruments: Recognition and measurement.

The Group did not separate an embedded derivative from its host contract of derivative linkedsecurities but designated the entire hybrid contract as at fair value through profit or loss.

After initial recognition, a financial asset at fair value through profit or loss is measured at fair valueand gains or losses arising from a change in the fair value are recognized in profit or loss. Interestincome, dividend income, and gains or losses from sale and repayment from financial assets at fairvalue through profit or loss are recognized in the statement of comprehensive income as net gains onfinancial instruments at fair value through profit or loss.

3.5.2 Financial Investments

Available-for-sale and held-to-maturity financial assets are presented as financial investments.

Available-for-sale financial assets

Profit or loss of financial assets classified as available for sale, except for impairment loss and foreignexchange gains and losses resulting from changes in amortized cost of debt securities, is recognizedas other comprehensive income, and cumulative profit or loss is reclassified from equity to profit orloss at the derecognition of the financial asset, and it is recognized as part of other operating profit orloss in the statement of comprehensive income.

However, interest income measured using the effective interest method is recognized in current profitor loss, and dividends of financial assets classified as available-for-sale are recognized when the rightto receive payment is established.

Available-for-sale financial assets denominated in foreign currencies are translated at the closing rate.For available-for-sale debt securities denominated in foreign currency, exchange differences resultingfrom changes in amortized cost are recognized in profit or loss as part of other operating income andexpenses. For available-for-sale equity securities denominated in foreign currency, the entire changein fair value including any exchange component is recognized in other comprehensive income.

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Held-to-maturity financial assets

Held-to-maturity financial assets are non-derivative financial assets with fixed or determinablepayments and fixed maturity that the Group’s management has the positive intention and ability tohold to maturity. Held-to-maturity financial assets are subsequently measured at amortized cost usingthe effective interest method after initial recognition and interest income is recognized using theeffective interest method.

3.5.3 Loans and Receivables

Non-derivative financial assets which meet all of following conditions are classified as loans andreceivables:

- Those with fixed or determinable payments.- Those that are not quoted in an active market.- Those that the Group does not intend to sell immediately or in the near term.- Those that the Group, upon initial recognition, does not designate as available-for-sale or as at fairvalue through profit or loss.

After initial recognition, these are subsequently measured at amortized cost using the effectiveinterest method.

If the financial asset is purchased under an agreement to resale the asset at a fixed price or at a pricethat provides a lender's return on the purchase price, the consideration paid is recognized as loansand receivables.

3.6 Impairment of Financial Assets

The Group assesses at the end of each reporting period whether there is any objective evidence thata financial asset or group of financial assets, except for financial assets at fair value through profit orloss is impaired. A financial asset or a group of financial assets is impaired and impairment losses areincurred, if and only if, there is an objective evidence of impairment as a result of one or more eventsthat occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events)has an impact on the estimated future cash flows of the financial asset or group of financial assetsthat can be reliably estimated. However, losses expected as a result of future events, no matter howlikely, are not recognized.

Objective evidence that a financial asset or group of assets is impaired includes the following lossevents:

- Significant financial difficulty of the issuer or obligor.- A breach of contract, such as a default or delinquency in interest or principal payments.- The lender, for economic or legal reasons relating to the borrower’s financial difficulty, granting tothe borrower a concession that the lender would not otherwise consider.- It becomes probable that the borrower will declare bankruptcy or undergo financial reorganization.- The disappearance of an active market for that financial asset because of financial difficulties.- Observable data indicating that there is a measurable decrease in the estimated future cash flowsfrom a group of financial assets since the initial recognition of those assets, although the decreasecannot yet be identified with the individual financial assets in the portfolio.

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In addition to the types of events in the preceding paragraphs, objective evidence of impairment foran investment in an equity instrument classified as an available-for-sale financial asset includes asignificant or prolonged decline in the fair value below its cost. The Group considers the decline in thefair value of over 30% against the original cost as a “significant decline”. A decline is considered asprolonged if the period, in which the fair value of the financial asset has been below its original cost atinitial recognition, is same as or more than six months.

If there is an objective evidence that an impairment loss has been incurred, the amount of the loss ismeasured and recognized in profit or loss as either provisions for credit loss or other operatingincome and expenses.

3.6.1 Loans and Receivables

If there is an objective evidence that an impairment loss on loans and receivables carried atamortized cost has been incurred, the amount of the loss is measured as the difference between theasset's carrying amount and the present value of estimated future cash flows (excluding future creditlosses that have not been incurred) discounted at the financial asset's original effective interest rate.

The Group first assesses whether an objective evidence of impairment exists individually for financialassets that are individually significant (individual assessment of impairment), and individually orcollectively for financial assets that are not individually significant.

If the Group determines that no objective evidence of impairment exists for an individually assessedfinancial asset, whether significant or not, it includes the asset in a group of financial assets withsimilar credit risk characteristics and collectively assesses them for impairment (collectiveassessment of impairment).

Individual assessment of impairment

Individual assessment of impairment losses are calculated by discounting the expected future cashflows of a loan at its original effective interest rate and comparing the resultant present value with theloan’s current carrying amount. This process normally encompasses management’s best estimate,such as operating cash flow of the borrower and net realizable value of any collateral held.

Collective assessment of impairment

A methodology based on historical loss experience is used to estimate inherent incurred loss ongroups of assets for collective assessment of impairment. Such methodology incorporates factorssuch as type of collateral, product and borrowers, credit rating, loss emergence period, recoveryperiod and applies probability of default on a group of assets and loss given default by type ofrecovery method. Also, consistent assumptions are applied to form a formula-based model inestimating inherent loss and to determine factors on the basis of historical loss experience andcurrent condition. The methodology and assumptions used for collective assessment of impairmentare reviewed regularly to reduce any differences between loss estimates and actual loss experience.

Impairment loss on loans reduces the carrying amount of the asset through use of an allowanceaccount, and when a loan becomes uncollectable, it is written off against the related allowanceaccount. If, in a subsequent period, the amount of the impairment loss decreases and is objectivelyrelated to the subsequent event after recognition of impairment, the previously recognized impairmentloss is reversed by adjusting the allowance account. The amount of the reversal is recognized in profitor loss.

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3.6.2 Available-For-Sale Financial Assets

When a decline in the fair value of an available-for-sale financial asset has been recognized in othercomprehensive income and there is an objective evidence that the asset is impaired, the cumulativeloss (the difference between the acquisition cost and current fair value, less any impairment loss onthat financial asset previously recognized in profit or loss) that had been recognized in othercomprehensive income is reclassified from equity to profit or loss as part of other operating incomeand expenses. The impairment loss on available-for-sale financial assets is directly deducted from thecarrying amount.

If, in a subsequent period, the fair value of a debt instrument classified as available-for-sale increasesand the increase can be objectively related to an event occurring after the impairment loss wasrecognized in profit or loss, a portion of the impairment loss is reversed up to but not exceeding thepreviously recorded impairment loss, with the amount of the reversal recognized in profit or loss aspart of other operating income and expenses in the statement of comprehensive income. However,impairment losses recognized in profit or loss for an available-for-sale equity instrument classified asavailable for sale are not reversed through profit or loss.

3.6.3 Held-to-Maturity Financial Assets

If there is an objective evidence that an impairment loss on held-to-maturity financial assets carried atamortized cost has been incurred, the amount of the loss is measured as the difference between theasset's carrying amount and the present value of estimated future cash flows discounted at thefinancial asset's original effective interest rate. The amount of the loss is recognized in profit or lossas part of other operating income and expenses. The impairment loss on held-to-maturity financialassets is directly deducted from the carrying amount.

In the case of a financial asset classified as held to maturity, if, in a subsequent period, the amount ofthe impairment loss decreases and it is objectively related to an event occurring after the impairmentis recognized, a portion of the previously recognized impairment loss is reversed up to but notexceeding the extent of amortized cost at the date of recovery. The amount of reversal is recognizedin profit or loss as part of other operating income and expenses in the statement of comprehensiveincome.

3.7 Derivative Financial Instruments

The Group enters into numerous derivative financial instrument contracts such as currency forwards,interest rate swaps, currency swaps and others for trading purposes or to manage its exposures tofluctuations in interest rates and currency exchange, amongst others. The Group’s derivativeoperations focus on addressing the needs of the Group’s corporate clients to hedge their riskexposure and to hedge the Group’s risk exposure that results from such client contracts. Thesederivative financial instruments are presented as derivative financial instruments within theconsolidated financial statements irrespective of transaction purpose and subsequent measurementrequirement.

The Group designates certain derivatives and non-derivatives as hedging instruments to hedge therisk of changes in fair value and cash flow of a recognized asset or liability or of an unrecognized firmcommitment (fair value hedge and cash flow hedge). The Group designates certain derivatives andnon-derivatives as hedging instruments to hedge the risk of foreign exchange of a net investment in aforeign operation (hedge of net investment).

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At the inception of the hedge, there is formal designation and documentation of the hedgingrelationship and the Group's risk management objective and strategy for undertaking the hedge. Thatdocumentation includes identification of the hedging instrument, the hedged item or transaction, thenature of the risk being hedged and how the entity will assess the hedging instrument's effectivenessin offsetting the exposure to changes in the hedged item's fair value attributable to the hedged risk.

3.7.1 Derivative Financial Instruments Held for Trading

All derivative financial instruments, except for derivatives that are designated and qualify for hedgeaccounting, are measured at fair value. Gains or losses arising from a change in fair value arerecognized in profit or loss as part of net gains or losses on financial instruments at fair value throughprofit or loss.

3.7.2 Fair Value Hedges

If derivatives and non-derivatives qualify for a fair value hedge, the change in fair value of the hedginginstrument and the change in fair value of the hedged item attributable to the hedged risk arerecognized in profit or loss as part of other operating income and expenses. Fair value hedgeaccounting is discontinued prospectively if the hedging instrument expires or is sold, terminated orexercised, or the hedge no longer meets the criteria for hedge accounting or the Group revokes thedesignation. Once fair value hedge accounting is discontinued, the adjustment to the carrying amountof a hedged item is fully amortized to profit or loss by the maturity of the financial instrument using theeffective interest method.

3.7.3 Cash Flow Hedges

The effective portion of changes in fair value of derivatives that are designated and qualify as cashflow hedges is recognized in other comprehensive income and the ineffective portion is recognized ingain or loss. The associated gains or losses that were previously recognized in other comprehensiveincome are reclassified from equity to profit or loss as a reclassification adjustment in the same periodor periods during which the hedged forecast cash flows affects profit or loss. Cash flow hedgeaccounting is discontinued prospectively if the hedging instrument expires or is sold, terminated orexercised, or the hedge no longer meets the criteria for hedge accounting or the Group revokes thedesignation. When the cash flow hedge accounting is discontinued, the cumulative gains or losses onthe hedging instrument that have been recognized in other comprehensive income are reclassified toprofit or loss over the year in which the forecast transaction occurs. If the forecast transaction is nolonger expected to occur, the cumulative gains or losses that had been recognized in othercomprehensive income are immediately reclassified to profit or loss.

3.7.4 Hedge of Net Investment

If derivatives and non-derivatives qualify for a net investment hedge, the effective portion of changesin fair value of hedging instrument is recognized in other comprehensive income and the ineffectiveportion is recognized in profit or loss. The gain or loss on the hedging instrument relating to theeffective portion of the hedge that has been recognized in other comprehensive income will bereclassified from other comprehensive income to profit or loss as a reclassification adjustment on thedisposal or partial disposal of the foreign operation in accordance with Korean IFRS 1039 FinancialInstruments: Recognition and Measurement.

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3.7.5 Embedded Derivatives

An embedded derivative is separated from the host contract and accounted for as aderivative if, and only if, the economic characteristics and risks of the embedded derivative are notclosely related to those of the host contract and a separate instrument with the same terms as theembedded derivative would meet the definition of a derivative and the hybrid (combined) instrument isnot measured at fair value with changes in fair value recognized in profit or loss. Gains or lossesarising from a change in the fair value of an embedded derivative separated from the host contractare recognized in profit or loss as part of net gains or losses on financial instruments at fair valuethrough profit or loss.

3.7.6 Day One Gain and Loss

If the Group uses a valuation technique that incorporates data not obtained from observable marketsfor the fair value at initial recognition of the financial instrument, there may be a difference betweenthe transaction price and the amount determined using that valuation technique. In thesecircumstances, the difference is deferred and not recognized in profit or loss, and is amortized byusing the straight-line method over the life of the financial instrument. If the fair value of the financialinstrument is subsequently determined using observable market inputs, the remaining deferredamount is recognized in profit or loss as part of net gains or losses on financial instruments at fairvalue through profit or loss or other operating income and expenses.

3.8 Property and Equipment

3.8.1 Recognition and Measurement

All property and equipment that qualify for recognition as an asset are measured at cost andsubsequently carried at cost less any accumulated depreciation and any accumulated impairmentlosses.

The cost of property and equipment includes any costs directly attributable to bringing the asset to thelocation and condition necessary for it to be capable of operating in the manner intended bymanagement and the initial estimate of the costs of dismantling and removing the item and restoringthe site on which it is located.

Subsequent expenditures are capitalized only when they prolong the useful life or enhance values ofthe assets but the costs of the day-to-day servicing of the assets such as repair and maintenancecosts are recognized in profit or loss as incurred.

3.8.2 Depreciation

Land is not depreciated whereas other property and equipment are depreciated using the method thatreflects the pattern in which the asset’s future economic benefits are expected to be consumed by theGroup. The depreciable amount of an asset is determined after deducting its residual value. As forleased assets, if there is no reasonable certainty that the Group will obtain ownership by the end ofthe lease term, the asset is fully depreciated over the shorter of the lease term and its useful life.

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The depreciation methods and estimated useful lives of the assets are as follows:

Property and equipment Depreciation method Estimated useful lives

Buildings and structures Straight-line 40 years

Leasehold improvements Declining-balance 4 yearsEquipment and vehicles Declining-balance 4 years

The residual value, the useful life and the depreciation method applied to an asset are reviewed atleast at each financial year end and, if expectations differ from previous estimates or if there has beena significant change in the expected pattern of consumption of the future economic benefits embodiedin the asset, the changes are accounted for as a change in an accounting estimate.

3.9 Investment Properties

3.9.1 Recognition and Measurement

Properties held to earn rentals or for capital appreciation or both are classified as investmentproperties. Investment properties are measured initially at their cost and subsequently the cost modelis used.

3.9.2 Depreciation

Land is not depreciated, whereas other investment properties are depreciated using the method thatreflects the pattern in which the asset’s future economic benefits are expected to be consumed by theGroup. The depreciable amount of an asset is determined after deducting its residual value.

The depreciation method and estimated useful lives of the assets are as follows:

Investment Properties Depreciation method Estimated useful livesBuildings Straight-line 40 years

The residual value, the useful life and the depreciation method applied to an asset are reviewed atleast at each financial year end and, if expectations differ from previous estimates or if there has beena significant change in the expected pattern of consumption of the future economic benefits embodiedin the asset, the changes are accounted for as a change in an accounting estimate.

3.10 Intangible Assets

Intangible assets are measured initially at cost and subsequently carried at their cost less anyaccumulated amortization and any accumulated impairment losses.

Intangible assets, except for goodwill and membership rights, are amortized using the straight-linemethod with no residual value over their estimated useful economic life since the asset is available foruse.

Intangible assets Amortization method Estimated useful livesIndustrial property rights Straight-line 5 ~ 10 yearsSoftware Straight-line 4 yearsOthers Straight-line 2 ~ 30 years

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The amortization period and the amortization method for intangible assets with a finite useful life arereviewed at least at each financial year end. Where an intangible asset is not being amortized,because its useful life is considered to be indefinite, the Group carries out a review in eachaccounting period to confirm whether or not events and circumstances still support the assumption ofan indefinite useful life. If they do not, the change from the indefinite to finite useful life is accountedfor as a change in an accounting estimate.

3.10.1 Goodwill

Recognition and measurement

Goodwill acquired from business combinations before January 1, 2010, is stated at its carryingamount which was recognized under the Group’s previous accounting policy, prior to the transition toKorean IFRS.

Goodwill acquired from business combinations after January 1, 2010, is initially measured as theexcess of the aggregate of the consideration transferred, fair value of non-controlling interest and theacquisition-date fair value of the acquirer’s previously held equity interest in the acquiree over the netidentifiable assets acquired and liabilities assumed. If this consideration is lower than the fair value ofthe net assets of the business acquired, the difference is recognized in profit or loss.

For each business combination, the Group decides whether the non-controlling interest in theacquiree is initially measured at fair value or at the non-controlling interest's proportionate share ofthe acquiree's identifiable net assets at the acquisition date.

Acquisition-related costs incurred to effect a business combination are charged to expenses in theperiods in which the costs are incurred and the services are received, except for the costs to issuedebt or equity securities.

Additional acquisitions of non-controlling interest

Additional acquisitions of non-controlling interests are accounted for as equity transactions.Therefore, no additional goodwill is recognized.

Subsequent measurement

Goodwill is not amortized and is stated at cost less accumulated impairment losses. However,goodwill that forms part of the carrying amount of an investment in associates is not separatelyrecognized and an impairment loss recognized is not allocated to any asset, including goodwill, whichforms part of the carrying amount of the investment in the associates.

3.10.2 Subsequent Expenditure

Subsequent expenditure is capitalized only when it enhances values of the assets. Internallygenerated intangible assets, such as goodwill and trade name, are not recognized as assets butexpensed as incurred.

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3.11 Leases

3.11.1 Finance Lease

A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidentalto ownership. At the commencement of the lease term, the Group recognizes finance leases asassets and liabilities in its statements of financial position at amounts equal to the fair value of theleased property or, if lower, the present value of the minimum lease payments, each determined atthe inception of the lease. Any initial direct costs of the lessee are added to the amount recognized asan asset.

Minimum lease payments are apportioned between the finance charge and the reduction of theoutstanding liability. The finance charge is allocated to each period during the lease term so as toproduce a constant periodic rate of interest on the remaining balance of the liability. Contingent rentsare charged as expenses in the periods in which they are incurred.

The depreciable amount of a leased asset is allocated to each accounting period during the period ofexpected use on a systematic basis consistent with the depreciation policy the Group adopts fordepreciable assets that are owned. If there is reasonable certainty that the lessee will obtainownership by the end of the lease term, the period of expected use is the useful life of the asset;otherwise, the asset is fully depreciated over the shorter of the lease term and its useful life.

3.11.2 Operating Lease

A lease is classified as an operating lease if it does not transfer substantially all the risks and rewardsincidental to ownership.

Leases in the financial statements of lessees

Lease payments under an operating lease (net of any incentives received from the lessor) arerecognized as an expense on a straight-line basis over the lease term unless another systematicbasis is more representative of the time pattern of the asset's benefit.

Leases in the financial statements of lessors

Lease income from operating leases are recognized in income on a straight-line basis over the leaseterm unless another systematic basis is more representative of the time pattern in which use benefitderived from the leased asset is diminished. Initial direct costs incurred by the lessors in negotiatingand arranging an operating lease are added to the carrying amount of the leased asset andrecognized as an expense over the lease term on the same basis as the lease income.

3.12 Greenhouse Gas Emission Rights and Liabilities

The Group measured at zero the emission rights received free of charge from the governmentfollowing the Enforcement of Allocation and Trading of Greenhouse Gas Emissions Allowances.Emission rights purchased are measured initially at cost and subsequently carried at their costs lessany accumulated impairment losses. Emission liabilities are measured as the sum of the carryingamount of emission allowances held by the Group and best estimate of the expenditure required tosettle the obligation for any excess emissions at the end of reporting period. The emission rights andliabilities are classified as ‘intangible assets’ and ‘provisions’, respectively, in the consolidatedstatement of financial position.

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The emission rights held for trading are measured at fair value and the changes in fair value arerecognized in profit or loss. The changes in fair value and gain or loss on disposal are classified asnon-operating income and expenses.

3.13 Impairment of Non-Financial Assets

The Group assesses at the end of each reporting period whether there is any indication that a non-financial asset, except for (i) deferred income tax assets, (ii) assets arising from employee benefitsand (iii) non-current assets (or group of assets to be sold) classified as held for sale, may beimpaired. If any such indication exists, the Group estimates the recoverable amount of the asset.However, irrespective of whether there is any indication of impairment, the Group tests (i) goodwillacquired in a business combination, (ii) intangible assets with an indefinite useful life and (iii)intangible assets not yet available for use for impairment annually by comparing their carrying amountwith their recoverable amount.

The recoverable amount is estimated for the individual asset. If it is not possible to estimate therecoverable amount of the individual asset, the Group determines the recoverable amount of thecash-generating unit to which the asset belongs (the asset's cash-generating unit). A cash-generatingunit is the smallest identifiable group of assets that generates cash inflows that are largelyindependent of the cash inflows from other assets or groups of assets. The recoverable amount of anasset is the higher of its fair value less costs to sell and its value in use. Value in use is the presentvalue of the future cash flows expected to be derived from an asset or cash-generating unit that arediscounted by a pre-tax rate that reflects current market assessments of the time value of money andthe risks specific to the asset for which the future cash flow estimates have not been adjusted.

If the recoverable amount of an asset is less than its carrying amount, the carrying amount of theasset is reduced to its recoverable amount. That reduction is an impairment loss and recognizedimmediately in profit or loss. For the purpose of impairment testing, goodwill acquired in a businesscombination is allocated to each of the cash-generating units that are expected to benefit from thesynergies of the combination. The impairment loss is allocated first to reduce the carrying amount ofany goodwill allocated to the cash-generating unit and then to the other assets of the unit pro rata onthe basis of the carrying amount of each asset in the unit.

An impairment loss recognized for goodwill is not reversed in a subsequent period. The Groupassesses at the end of each reporting period whether there is any indication that an impairment lossrecognized in prior periods for an asset, other than goodwill, may no longer exist or may havedecreased, and an impairment loss recognized in prior periods for an asset other than goodwill shallbe reversed if, and only if, there has been a change in the estimates used to determine the asset'srecoverable amount since the last impairment loss was recognized. The increased carrying amount ofan asset other than goodwill attributable to a reversal of an impairment loss cannot exceed thecarrying amount that would have been determined (net of amortization or depreciation) had noimpairment loss been recognized for the asset in prior years.

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3.14 Non-Current Assets Held for Sale

A non-current asset or disposal group is classified as held for sale if its carrying amount will berecovered principally through a sale transaction rather than through continuing use. For beingqualified as held for sale, the asset (or disposal group) must be available for immediate sale in itspresent condition and its sale must be highly probable. A non-current asset (or disposal group)classified as held for sale is measured at the lower of its carrying amount and fair value less costs tosell which is measured in accordance with the applicable Korean IFRS, immediately before the initialclassification of the asset (or disposal group) as held for sale.

A non-current asset while it is classified as held for sale or while it is part of a disposal groupclassified as held for sale is not depreciated (or amortized).

Impairment loss is recognized for any initial or subsequent write-down of the asset (or disposal group)to fair value less costs to sell. Gains are recognized for any subsequent increase in fair value lesscosts to sell of an asset, but not in excess of the cumulative impairment loss that has beenrecognized.

3.15 Financial Liabilities at Fair Value through Profit or Loss

Financial liabilities at fair value through profit or loss are financial liabilities held for trading. After initialrecognition, financial liabilities at fair value through profit or loss are measured at fair value and gainsor losses arising from changes in the fair value, and gains or losses from sale and repayment offinancial liabilities at fair value through profit or loss are recognized as net gains on financialinstruments at fair value through profit or loss in the statement of comprehensive income.

3.16 Provisions

Provisions are recognized when the Group has a present obligation (legal or constructive) as a resultof a past event and it is probable that an outflow of resources embodying economic benefits will berequired to settle the obligation and a reliable estimate can be made of the amount of the obligation.The risks and uncertainties that inevitably surround many events and circumstances are taken intoaccount in reaching the best estimate of provisions, and where the effect of the time value of moneyis material, the amount of provisions are the present value of the expenditures expected to berequired to settle the obligation.

Provisions on confirmed and unconfirmed acceptances and guarantees, unfunded commitments ofcredit cards and unused credit lines of consumer and corporate loans are recognized using avaluation model that applies the credit conversion factor, probability of default, and loss given default.

Provisions are reviewed at the end of each reporting period and adjusted to reflect the current bestestimate. If it is no longer probable that an outflow of resources embodying economic benefits will berequired to settle the obligation, the provisions are reversed.

3.17 Financial Guarantee Contracts

A financial guarantee contract is a contract that requires the Group to make specified payments toreimburse the holder for a loss it incurs because a specified debtor fails to make payments when dueaccording to the original or modified terms of a debt instrument.

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Financial guarantee contracts are initially recognized at fair value. After initial recognition, financialguarantee contracts are measured at the higher of:

– The amount determined in accordance with Korean IFRS 1037 Provisions, Contingent Liabilitiesand Contingent Assets, and

– The initial amount recognized, less, when appropriate, cumulative amortization recognized inaccordance with Korean IFRS 1018 Revenue.

3.18 Equity Instrument Issued by the Group

An equity instrument is any contract or agreement that evidences a residual interest in the assets ofan entity after deducting all of its liabilities. Ordinary shares are classified as equity. Incremental costsdirectly attributable to the issue of new shares are deducted, net of tax, from the equity.

3.19 Revenue Recognition

3.19.1 Interest Income and Expense

Interest income and expense are recognized using the effective interest method. The effectiveinterest method is a method of calculating the amortized cost of a financial asset or a financial liability(or groups of financial assets or financial liabilities) and of allocating the interest income or interestexpense over the relevant period.

The effective interest rate is the rate that exactly discounts estimated future cash receipts orpayments through the expected life of the financial instrument or, where appropriate, a shorter period,to the net carrying amount of the financial asset or financial liability. When calculating the effectiveinterest rate, the Group estimates cash flows considering all contractual terms of the financialinstrument but does not consider future credit losses. The calculation includes all fees and points paidor received between parties to the contract that are an integral part of the effective interest rate,transaction costs, and all other premiums or discounts. In those rare cases when it is not possible toestimate reliably the cash flows or the expected life of a financial instrument (or group of financialinstruments), the Group uses the contractual cash flows over the full contractual term of the financialinstrument (or group of financial instruments).

Interest on impaired financial assets is recognized using the rate of interest used to discount thefuture cash flows for the purpose of measuring the impairment loss.

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3.19.2 Fee and Commission Income

The Group recognizes financial service fees in accordance with the accounting standard of thefinancial instrument related to the fees earned.

Fees that are an integral part of the effective interest of a financial instrument

Such fees are generally treated as adjustments of effective interest. Such fees may includecompensation for activities such as evaluating the borrower's financial condition, evaluating andrecording guarantees, collateral and other security arrangements, negotiating the terms of theinstrument, preparing and processing documents and closing the transaction and origination feesreceived on issuing financial liabilities measured at amortized cost. However, fees relating to thecreation or acquisition of a financial instrument at fair value through profit or loss are recognized asrevenue immediately.

Fees earned as services are provided

Such fees are recognized as revenue as the services are provided. The fees include fees charged forservicing a financial instrument and charged for managing investments.

Fees that are earned on the execution of a significant act

Such fees are recognized as revenue when the significant act has been completed.

Commission on negotiation or participation in negotiation for the third party such as trading stocks orother securities, arranging transfer and acquisition of business is recognized as revenue when thetransaction has been completed.

A syndication fee received by the Group that arranges a loan and retains no part of the loan packagefor itself (or retains a part at the same effective interest rate for comparable risk as other participants)is compensation for the service of syndication. Such a fee is recognized as revenue when thesyndication has been completed.

3.19.3 Dividend Income

Dividend income is recognized in profit or loss when the right to receive payment is established.Dividend income from financial assets at fair value through profit or loss and financial investment isrecognized in profit or loss as part of net gains on financial assets at fair value through profit or lossand other operating income and expenses, respectively.

3.20 Employee Compensation and Benefits

3.20.1 Post-employment Benefits:

Defined benefit plans

All post-employment benefits, other than defined contribution plans, are classified as defined benefitplans. The amount recognized as a net defined benefit liability is the present value of the definedbenefit obligation less the fair value of plan assets at the end of the reporting period.

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The present value of the defined benefit obligation is calculated annually by independent actuariesusing the Projected Unit Credit method. The rate used to discount post-employment benefitobligations is determined by reference to market yields at the end of the reporting period on highquality corporate bonds. The currency and term of the corporate bonds are consistent with thecurrency and estimated term of the post-employment benefit obligations. Actuarial gains and lossesincluding experience adjustments and the effects of changes in actuarial assumptions are recognizedin other comprehensive income.

When the total of the present value of the defined benefit obligation minus the fair value of planassets results in an asset, it is recognized to the extent of the present value of any economic benefitsavailable in the form of refunds from the plan or reductions in future contributions to the plan.

Past service cost is the change in the present value of the defined benefit obligation, which ariseswhen the Group introduces a defined benefit plan or changes the benefits of an existing definedbenefit plan. Such past service cost is immediately recognized as an expense for the period.

Defined contribution plans

The contributions are recognized as employee benefit expense when they are due.

3.20.2 Short-term Employee Benefits

Short-term employee benefits are employee benefits (other than termination benefits) that are due tobe settled within 12 months after the end of the period in which the employees render the relatedservice. The undiscounted amount of short-term employee benefits expected to be paid in exchangefor that service is recognized as a liability (accrued expense), after deducting any amount alreadypaid.

The expected cost of profit-sharing and bonus payments are recognized as liabilities when the Grouphas a present legal or constructive obligation to make such payments as a result of past eventsrendered by employees and a reliable estimate of the obligation can be made.

3.20.3 Share-based Payment

The Group has share grant and mileage stock programs to directors and employees of the Group.The Group has a choice of whether to settle share grant in cash or by issuing equity instruments ofKB Financial Group Inc., the ultimate parent company, at the date of settlement, while the Group shallsettle the mileage stock in cash based on the stock price.

For a share-based payment transaction in which the terms of the arrangement provide the Group withthe choice of whether to settle in cash or by issuing equity instruments, the Group determines that ithas a present obligation to settle in cash because the Group has a past practice and a stated policy ofsettling in cash. Therefore, the fair value of the employee service is recognized as expense andaccrued expenses over the vesting period. Also, the Group accounts for the mileage stock inaccordance with the requirements of cash-settled share-based payment transactions, and recognizesthe corresponding liability and expenses at the vesting period.

Until the liability is settled, the Group remeasures the fair value of the liability at the end of eachreporting period and at the date of settlement, with any changes in fair value recognized in profit orloss for the period.

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3.20.4 Termination Benefits

Termination benefits are payable when employment is terminated by the Group before the normalretirement date, or whenever an employee accepts voluntary redundancy in exchange for thesebenefits. The Group shall recognize a liability and expense for termination benefits at the earlier of thefollowing dates: when the Group can no longer withdraw the offer of those benefits and when theGroup recognizes costs for a restructuring that is within the scope of Korean IFRS 1037 and involvesthe payment of termination benefits. Termination benefits are measured by considering the number ofemployees expected to accept the offer in the case of a voluntary early retirement. Terminationbenefits over 12 months after the reporting period are discounted to present value.

3.21 Income Tax Expenses

Income tax expense comprises current tax expense and deferred income tax expense. Current anddeferred income tax are recognized as income or expense for the period, except to the extent that thetax arises from a transaction or an event which is recognized, in the same or a different period outsideprofit or loss, either in other comprehensive income or directly in equity and a business combination.

Income tax expense for the interim period is recognized based on management’s best estimate of theweighted average annual income tax rate expected for the full financial year.

3.21.1 Deferred Income Tax

Deferred income tax is recognized, using the asset-liability method, on temporary differences arisingbetween the tax based amount of assets and liabilities and their carrying amount in the interimconsolidated financial statements. Deferred income tax liabilities are recognized for all taxabletemporary differences and deferred income tax assets are recognized for all deductible temporarydifferences to the extent that it is probable that taxable profit will be available against which thedeductible temporary difference can be utilized. However, deferred income tax liabilities are notrecognized if they arise from the initial recognition of goodwill; deferred income tax is not accountedfor if it arises from initial recognition of an asset or liability in a transaction other than a businesscombination that at the time of the transaction affects neither accounting nor taxable profit or loss.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, andassociates, except for deferred income tax liabilities for which the timing of the reversal of thetemporary difference is controlled by the Group and it is probable that the temporary difference willnot reverse in the foreseeable future.

The carrying amount of a deferred income tax asset is reviewed at the end of each reporting period.The Group reduces the carrying amount of a deferred income tax asset to the extent that it is nolonger probable that sufficient taxable profit will be available to allow the benefit of part or all of thatdeferred income tax asset to be utilized.

Deferred tax assets and liabilities shall be measured at the tax rates that are expected to apply to theperiod when the asset is realized or the liability is settled, based on tax rates (and tax laws) that havebeen enacted or substantively enacted by the end of the reporting period. The measurement ofdeferred tax liabilities and deferred tax assets shall reflect the tax consequences that would followfrom the manner in which the Group expects, at the end of the reporting period, to recover or settlethe carrying amount of its assets and liabilities.

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The Group offsets deferred income tax assets and deferred income tax liabilities when the Group hasa legally enforceable right to offset current income tax assets against current income tax liabilities;and the deferred income tax assets and the deferred income tax liabilities relate to income taxeslevied by the same taxation authority on either the same taxable entity; or different taxable entitieswhich intend either to settle current income tax liabilities and assets on a net basis, or to realize theassets and settle the liabilities simultaneously, in each future period in which significant amounts ofdeferred income tax liabilities or assets are expected to be settled or recovered.

3.21.2 Uncertain Tax Positions

Uncertain tax positions arise from tax treatments applied by the Group which may be challenged bythe tax authorities due to the complexity of the transaction or different interpretation of the tax laws, aclaim for rectification brought by the Group, or an appeal for a refund claimed from the tax authoritiesrelated to additional assessments. The Group recognizes its uncertain tax positions in the interimconsolidated financial statements based on the guidance in Korean IFRS 1012. The income tax assetis recognized if a tax refund is probable for taxes paid and levied by the tax authority. However,additional tax and additional dues on tax refund are recognized in accordance with Korean IFRS 1037as its economic substances are considered as interest or penalties.

3.22 Transactions with the Trust Accounts

Under the Financial Investment Services and Capital Markets Act, the Group recognizes trustaccounts (“the trust accounts”) as separate. The borrowings from trust accounts represent transfer offunds in trust accounts into banking accounts. Such borrowings from trust accounts are recorded asreceivables from the banking accounts in the trust accounts and as borrowings from trust accounts inthe banking accounts. The Group earns trust fees from the trust accounts for its management of trustassets and operations. The reserves for future profits and losses are set up in the trust accounts forprofits and losses related to those trust funds with a guarantee of the principal or of the principal anda certain minimum rate of return in accordance with the relevant laws and regulations applicable totrust operations. The reserves are used to provide for the losses on such trust funds and, if the lossesincurred are in excess of the reserves, the excess losses are compensation paid as a loss on trustmanagement in other operating expenses and the trust accounts recognize the correspondingcompensation as compensation from banking accounts.

3.23 Operating Segments

Operating segments are components of the Group where separate financial information is availableand is evaluated regularly by the chief operating decision maker in deciding how to allocate resourcesand in assessing performance.

Segment information includes items which are directly attributable and reasonably allocated to thesegment.

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4. Financial Risk Management

4.1 Summary

4.1.1 Overview of Financial Risk Management Policy

The financial risks that the Group is exposed to are credit risk, market risk, liquidity risk, operationalrisk and others.

The note regarding financial risk management provides information about the risks that the Group isexposed to, including the objectives, policies and processes for managing the risks, the methodsused to measure the risks, and capital management. Additional quantitative information is disclosedthroughout the interim consolidated financial statements.

The Group’s risk management system focuses on increasing transparency, developing the riskmanagement environment, preventing transmission of risk to other related subsidiaries, and thepreemptive response to risk due to rapid changes in the financial environment to support the Group’slong-term strategy and business decisions efficiently. Credit risk, market risk, liquidity risk, andoperational risk have been recognized as the Group’s key risks. These risks are measured in InternalCapital or Value at Risk (VaR) and are managed using a statistical method.

4.1.2 Risk Management Organization

Risk Management Committee

The Risk Management Committee establishes risk management strategies in accordance with thedirectives of the Board of Directors and determines the Group’s target risk appetite approvessignificant risk matters and reviews the level of risks that the Group is exposed to and theappropriateness of the Group’s risk management operations as an ultimate decision-making authority.

Risk Management Council

The Risk Management Council is a consultative group which reviews and makes decisions on mattersdelegated by the Risk Management Committee and discusses the detailed issues relating to theGroup’s risk management.

Risk Management Subcommittee

The Risk Management Subcommittee enforces decisions made by Risk Management Council, andmakes practical decisions to implement risk management policies and procedures.

- Credit Risk Management SubcommitteeThe Credit Risk Management Subcommittee approves exotic and hybrid products accompanyingcredit risk and reviews newly developed products accompanying credit risk. Also, it reviews andapproves the exposure limits by industry.

- Market Risk Management SubcommitteeThe Market Risk Management Subcommittee reviews and makes decisions on setting risk limits andapproving the standard for investments in newly developed standard, exotic and hybrid products.

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- Operational Risk Management SubcommitteeThe Operational Risk Management Subcommittee reviews the issues that have a significant effecton the Group’s operational risk relating to establishment, amendment and abolition of major system,process and others.

Risk Management Group

The Risk Management Group is responsible for managing specific policies, procedures and workprocesses relating to the Group’s risk management.

4.2 Credit Risk

4.2.1 Overview of Credit Risk

Credit risk is the risk of possible losses in an asset portfolio in the event of a counterparty’s default,breach of contract and deterioration in the credit quality of the counterparty. For risk managementreporting purposes, the individual borrower’s default risk, country risk, specific risks and other creditrisk exposure components are considered as a whole.

4.2.2 Credit Risk Management

The Group measures expected losses and internal capital on assets that are subject to credit riskmanagement whether on- or off-balance sheet items and uses expected losses and internal capital asa management indicator. The Group manages credit risk by allocating credit risk internal capital limits.

In addition, the Group controls the credit concentration risk exposure by applying and managing totalexposure limits to prevent an excessive risk concentration to each industry and borrower.

The Group has organized a credit risk management group that focuses on credit risk management inaccordance with the Group’s credit risk management policy. The Group’s credit group, customerstrategy group and SME/SOHO group, which are independent from the sales department, areresponsible for loan policy, loan limit, loan review, credit evaluation, restructuring and subsequentevents. The credit risk management group is also responsible for planning risk management policy,applying limits of credit lines, measuring the credit risk internal capital, adjusting credit limits,reviewing credit and verifying credit evaluation models.

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4.2.3 Maximum Exposure to Credit Risk

The Group’s maximum exposures of financial instruments, excluding equity securities, to credit riskwithout consideration of collateral values as of September 30, 2017 and December 31, 2016, are asfollows:

(In millions of Korean won) September 30,2017

December 31,2016

Financial assetsDue from financial institutions 15,886,239 12,126,695Financial assets at fair value through profit or lossFinancial assets held for trading 1 8,505,952 7,765,467Financial assets designated at fair value throughprofit or loss 130,185 129,535

Derivatives 1,591,665 2,796,445Loans 2 247,995,401 236,551,052Financial investmentsAvailable-for-sale financial assets 24,232,504 21,807,445Held-to-maturity financial assets 9,153,618 8,427,498

Other financial assets 2 6,503,066 5,021,200313,998,630 294,625,337

Off-balance sheet itemsAcceptances and guarantees contracts 7,802,671 7,552,124Financial guarantee contracts 3,201,644 3,361,307Commitments 51,474,727 54,261,648

62,479,042 65,175,079376,477,672 359,800,416

1 The amounts of 72,230 million and 72,349 million as of September 30, 2017 and December31, 2016, respectively, related to financial instruments indexed to the price of gold are included.

2 Loans and other financial assets are presented net of allowance for loan losses.

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4.2.4 Credit Risk of Loans

The Group maintains allowances for loan losses associated with credit risk on loans to manage itscredit risk.

Loans are categorized as follows:

(In millions of Korean won)September 30, 2017

LoansRetail Corporate Total

Amount % Amount % Amount %Neither past duenor impaired 126,262,368 99.17 120,666,988 98.79 246,929,356 98.99Past due but notimpaired 657,755 0.52 140,646 0.12 798,401 0.32Impaired 405,257 0.31 1,326,732 1.09 1,731,989 0.69

127,325,380 100.00 122,134,366 100.00 249,459,746 100.00Allowances (318,750) 0.25 (1,145,595) 0.94 (1,464,345) 0.59Carrying amount 127,006,630 120,988,771 247,995,401

(In millions of Korean won)December 31, 2016

LoansRetail Corporate Total

Amount % Amount % Amount %Neither past duenor impaired 122,595,003 98.96 112,711,155 98.64 235,306,158 98.81Past due but notimpaired 825,239 0.67 191,029 0.17 1,016,268 0.43Impaired 457,086 0.37 1,367,151 1.19 1,824,237 0.76

123,877,328 100.00 114,269,335 100.00 238,146,663 100.00Allowances (333,269) 0.27 (1,262,342) 1.10 (1,595,611) 0.67Carrying amount 123,544,059 113,006,993 236,551,052

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Credit qualities of loans that are neither past due nor impaired are as follows:


Retail Corporate TotalGrade 1 112,368,462 61,419,110 173,787,572Grade 2 12,441,376 51,732,729 64,174,105Grade 3 883,838 5,635,167 6,519,005Grade 4 375,048 1,529,575 1,904,623Grade 5 193,644 350,407 544,051

126,262,368 120,666,988 246,929,356


Retail Corporate TotalGrade 1 106,054,765 53,999,305 160,054,070Grade 2 14,292,822 49,186,970 63,479,792Grade 3 1,519,409 7,563,785 9,083,194Grade 4 516,670 1,614,152 2,130,822Grade 5 211,337 346,943 558,280

122,595,003 112,711,155 235,306,158

Credit qualities of loans graded according to internal credit ratings are as follows:

Retail CorporateGrade 1 1 to 5 grade AAA to BBB+Grade 2 6 to 8 grade BBB to BBGrade 3 9 to 10 grade BB- to BGrade 4 11 grade B- to CCCGrade 5 12 grade or under CC or under

Loans that are past due but not impaired are as follows:


1 ~ 29 days 30 ~ 59 days 60 ~ 89 days TotalRetail 542,783 74,518 40,454 657,755Corporate 94,046 25,651 20,949 140,646

636,829 100,169 61,403 798,401


1 ~ 29 days 30 ~ 59 days 60 ~ 89 days TotalRetail 705,551 79,990 39,698 825,239Corporate 130,005 38,210 22,814 191,029

835,556 118,200 62,512 1,016,268

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Impaired loans are as follows:

(In millions of Korean won) September 30, 2017Retail Corporate Total

Loans 405,257 1,326,732 1,731,989Allowances (130,797) (804,387) (935,184)Individual - (694,609) (694,609)Collective (130,797) (109,778) (240,575)

274,460 522,345 796,805

(In millions of Korean won) December 31, 2016Retail Corporate Total

Loans 457,086 1,367,151 1,824,237Allowances (146,507) (894,227) (1,040,734)Individual - (770,805) (770,805)Collective (146,507) (123,422) (269,929)

310,579 472,924 783,503

A quantification of the extent to which collateral and other credit enhancements mitigate credit risk asof September 30, 2017 and December 31, 2016, is as follows:

(In millions of Korean won) September 30, 2017Impaired Loans Non-impaired Loans Total

Individual Collective Past due Not past dueGuarantee 15,374 119,919 163,653 55,766,993 56,065,939Deposits and savings 10,458 5,066 25,247 1,497,421 1,538,192Property and equipment 125 987 33 2,017,940 2,019,085Real estate 146,189 313,734 434,743 143,551,905 144,446,571

172,146 439,706 623,676 202,834,259 204,069,787

(In millions of Korean won) December 31, 2016Impaired Loans Non-impaired Loans

TotalIndividual Collective Past due Not past dueGuarantee 21,168 118,611 186,762 52,128,706 52,455,247Deposits and savings 10,000 6,026 27,493 1,574,010 1,617,529Property and equipment 4,280 1,531 142 1,735,898 1,741,851Real estate 169,837 317,314 588,736 136,804,042 137,879,929

205,285 443,482 803,133 192,242,656 193,694,556

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4.2.5 Credit Quality of Securities

The financial assets at fair value through profit or loss and financial investments, excluding equitysecurities that are exposed to credit risk as of September 30, 2017 and December 31, 2016, are asfollows:

(In millions of Korean won) September 30, 2017 December 31, 2016Securities that are neither past due nor impaired 41,950,029 38,057,596Impaired securities - -

41,950,029 38,057,596

The credit quality of securities, excluding equity securities that are neither past due nor impaired, as ofSeptember 30, 2017 and December 31, 2016, is as follows:


Grade 1 Grade 2 Grade 3 Grade 4 Grade 5 TotalFinancial assetsheld for trading 7,479,295 895,352 35,667 23,408 - 8,433,722Financial assetsdesignated at fairvalue throughprofit or loss 130,185 - - - - 130,185Available-for-salefinancial assets 24,071,358 141,662 16,811 2,673 - 24,232,504Held-to-maturityfinancial assets 9,148,454 - 5,164 - - 9,153,618

40,829,292 1,037,014 57,642 26,081 - 41,950,029


Grade 1 Grade 2 Grade 3 Grade 4 Grade 5 TotalFinancial assetsheld for trading 6,313,489 1,373,625 6,004 - - 7,693,118Financial assetsdesignated at fairvalue throughprofit or loss 129,535 - - - - 129,535Available-for-salefinancial assets 21,655,179 123,614 28,652 - - 21,807,445Held-to-maturityfinancial assets 8,427,498 - - - - 8,427,498

36,525,701 1,497,239 34,656 - - 38,057,596

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The credit qualities of securities excluding equity securities according to the credit ratings by externalrating agencies are as follows:

Creditquality

Domestic ForeignKIS NICE P&I FN S&P Fitch-IBCA Moody's

Grade 1 AA0 to AAA AA0 to AAA AA0 to AAA A- to AAA A- to AAA A3 to Aaa

Grade 2 A- to AA- A- to AA- A- to AA- BBB- toBBB+

BBB- toBBB+ Baa3 to Baa1

Grade 3 BBB0 toBBB+

BBB0 toBBB+

BBB0 toBBB+

BB toBB+

BB toBB+

Ba2 toBa1

Grade 4 BB0 to BBB- BB0 to BBB- BB0 to BBB- B+ to BB- B+ to BB- B1 to Ba3Grade 5 BB- or under BB- or under BB- or under B or under B or under B2 or under

Debt securities’ credit qualities denominated in Korean won are based on the lowest credit rating bythe three domestic credit rating agencies above, and those denominated in foreign currencies arebased on the lowest credit ratings by the three foreign credit rating agencies above.

4.2.6 Credit Risk Mitigation of Derivative Financial Instruments

A quantification of the extent to which collateral mitigates credit risk of derivative financial instrumentsas of September 30, 2017 and December 31, 2016, is as follows:

(In millions of Korean won) September 30, 2017 December 31, 2016Deposits and savings, securities and others 311,149 444,170

4.2.7 Credit Risk Concentration Analysis

Details of the Group’s loans by country as of September 30, 2017 and December 31, 2016, are asfollows:


Retail Corporate Total % AllowancesCarryingamount

Korea 127,229,891 118,730,281 245,960,172 98.60 (1,417,031) 244,543,141China - 1,895,983 1,895,983 0.76 (31,190) 1,864,793Japan 587 105,313 105,900 0.04 (8,461) 97,439United States - 867,806 867,806 0.34 (1,890) 865,916Europe - 237,010 237,010 0.10 (2,872) 234,138Others 94,902 297,973 392,875 0.16 (2,901) 389,974

127,325,380 122,134,366 249,459,746 100.00 (1,464,345) 247,995,401

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Retail Corporate Total % AllowancesCarryingamount

Korea 123,804,999 111,399,307 235,204,306 98.76 (1,554,872) 233,649,434China - 1,324,839 1,324,839 0.56 (23,288) 1,301,551Japan 1,352 90,977 92,329 0.04 (10,384) 81,945United States - 984,472 984,472 0.41 (2,031) 982,441Europe 1 206,580 206,581 0.09 (1,719) 204,862Others 70,976 263,160 334,136 0.14 (3,317) 330,819

123,877,328 114,269,335 238,146,663 100.00 (1,595,611) 236,551,052

Details of the Group’s corporate loans by industry as of September 30, 2017 and December 31, 2016,are as follows:

(In millions of Korean won) September 30, 2017

Loans % AllowancesCarryingamount

Financial institutions 9,343,091 7.65 (5,070) 9,338,021Manufacturing 38,670,805 31.66 (466,647) 38,204,158Service 51,838,680 42.44 (294,209) 51,544,471Wholesale and retail 14,918,753 12.22 (89,370) 14,829,383Construction 2,816,062 2.31 (267,153) 2,548,909Public 857,187 0.70 (3,605) 853,582Others 3,689,788 3.02 (19,541) 3,670,247

122,134,366 100.00 (1,145,595) 120,988,771

(In millions of Korean won) December 31, 2016


Financial institutions 8,789,886 7.69 (4,170) 8,785,716Manufacturing 36,381,882 31.85 (530,456) 35,851,426Service 47,905,220 41.92 (298,079) 47,607,141Wholesale and retail 13,865,864 12.13 (108,688) 13,757,176Construction 2,895,971 2.53 (291,646) 2,604,325Public 855,715 0.75 (6,307) 849,408Others 3,574,797 3.13 (22,996) 3,551,801

114,269,335 100.00 (1,262,342) 113,006,993

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Details of the Group’s retail loans by type as of September 30, 2017 and December 31, 2016, are asfollows:



Housing purpose 60,564,828 47.57 (16,772) 60,548,056General purpose 66,760,552 52.43 (301,978) 66,458,574

127,325,380 100.00 (318,750) 127,006,630



Housing purpose 58,724,113 47.41 (17,939) 58,706,174General purpose 65,153,215 52.59 (315,330) 64,837,885

123,877,328 100.00 (333,269) 123,544,059

Details of the Group’s securities excluding equity securities and derivative financial instruments byindustry as of September 30, 2017 and December 31, 2016, are as follows:

(In millions of Korean won) September 30, 2017Amount %

Financial assets held for tradingGovernment and government funded institutions 2,882,125 34.18Finance and Insurance 3,980,832 47.20Others 1,570,765 18.62

8,433,722 100.00Financial assets designated at fair value through profit or lossFinance and Insurance 130,185 100.00

130,185 100.00Derivative financial assetsGovernment and government funded institutions 9,604 0.60Finance and Insurance 1,491,338 93.70Others 90,723 5.70

1,591,665 100.00Available-for-sale financial assetsGovernment and government funded institutions 7,351,294 30.34Finance and Insurance 15,591,672 64.34Others 1,289,538 5.32

24,232,504 100.00Held-to-maturity financial assetsGovernment and government funded institutions 2,628,137 28.72Finance and Insurance 6,405,138 69.97Others 120,343 1.31

9,153,618 100.0043,541,694

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(In millions of Korean won) December 31, 2016Amount %

Financial assets held for tradingGovernment and government funded institutions 2,780,010 36.14Finance and Insurance 3,880,523 50.44Others 1,032,585 13.42

7,693,118 100.00Financial assets designated at fair value through profit or lossFinance and Insurance 129,535 100.00

129,535 100.00Derivative financial assetsGovernment and government funded institutions 91,705 3.28Finance and Insurance 2,501,525 89.45Others 203,215 7.27

2,796,445 100.00Available-for-sale financial assetsGovernment and government funded institutions 9,394,127 43.08Finance and Insurance 11,099,951 50.90Others 1,313,367 6.02

21,807,445 100.00Held-to-maturity financial assetsGovernment and government funded institutions 3,166,355 37.57Finance and Insurance 5,110,783 60.64Others 150,360 1.79

8,427,498 100.0040,854,041

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Details of the Group’s securities excluding equity securities and derivative financial instruments bycountry, as of September 30, 2017 and December 31, 2016, are as follows:

(In millions of Korean won) September 30, 2017Amount %

Financial assets held for tradingKorea 7,541,347 89.42Others 892,375 10.58

8,433,722 100.00Financial assets designated at fair value through profit or lossKorea 130,185 100.00

130,185 100.00Derivative financial assetsKorea 899,788 56.53United States 233,763 14.69United Kingdom 96,174 6.04France 130,067 8.17Others 231,873 14.57

1,591,665 100.00Available-for-sale financial assetsKorea 23,761,947 98.06Others 470,557 1.94

24,232,504 100.00Held-to-maturity financial assetsKorea 8,059,089 88.04Others 1,094,529 11.96

9,153,618 100.0043,541,694

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(In millions of Korean won) December 31, 2016Amount %

Financial assets held for tradingKorea 7,468,314 97.08Others 224,804 2.92

7,693,118 100.00Financial assets designated at fair value through profit or lossKorea 129,535 100.00

129,535 100.00Derivative financial assetsKorea 1,955,822 69.94United States 242,763 8.68United Kingdom 117,318 4.20France 202,001 7.22Others 278,541 9.96

2,796,445 100.00Available-for-sale financial assetsKorea 21,377,838 98.03Others 429,607 1.97

21,807,445 100.00Held-to-maturity financial assetsKorea 7,279,423 86.38Others 1,148,075 13.62

8,427,498 100.0040,854,041

The counterparties to the financial assets under due from financial institutions and financialinstruments indexed to the price of gold within financial assets held for trading and derivatives are inthe financial and insurance industries which have high credit ratings.

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4.3 Liquidity risk

4.3.1 Overview of Liquidity Risk

Liquidity risk is the risk of insolvency or loss due to a disparity between the inflow and outflow offunds, unexpected outflow of funds, and obtaining funds at a high price or disposing of securities atan unfavorable price due to lack of available funds. The Group manages its liquidity risk throughanalysis of the contractual maturity of interest-bearing assets and liabilities, assets and liabilitiesrelated to the other in and outflows, and off-balance sheet items related to the inflows and outflows ofcurrency derivative instruments and others.

4.3.2. Liquidity Risk Management and Indicator

The liquidity risk is managed by ALM (‘Asset Liability Management’) and related guidelines which areapplied to the risk management policies and procedures that addresses all the possible risks thatarise from the overall business of the Group.

The Group has to establish the liquidity risk management strategy including the objectives of liquidityrisk management, management policies and internal control system, and obtain approval from RiskManagement Committee. Risk Management Committee operates the Risk Management Council forthe purpose of efficient risk management, monitors establishment and enforcement of policies basedon risk management strategy.

For the purpose of liquidity management, the liquidity gap ratio, liquidity ratio, maturity gap ratio andthe results of the stress testing related to liquidity risk on transactions affecting the inflows andoutflows of funds and transactions of off-balance sheet items are measured, managed and reportedto the Risk Management Committee and Risk Management Council on a regular basis.

4.3.3. Analysis of Remaining Contractual Maturity of Financial Assets and Liabilities

Cash flows disclosed below are undiscounted contractual principal and interest to be received (paid)and, thus, differ from the amounts in the interim consolidated financial statements which are based onthe present value of expected cash flows. The amount of interest to be received or paid on floatingrate assets and liabilities is measured on the assumption that the current interest rate would be thesame through maturity.

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The remaining contractual maturity of financial assets and liabilities, excluding derivatives held for cashflow hedging, as of September 30, 2017 and December 31, 2016, is as follows:

(In millions of Korean won) September 30, 2017On

demandUp to

1 month1-3

months3-12

months1-5years

Over 5years Total

Financial assetsCash and due fromfinancial institutions 1 5,952,056 463,785 194,564 230,559 - - 6,840,964Financial assetsheld for trading 2 8,776,650 - - - - - 8,776,650

Financial assetsdesignated at fairvalue through profit orloss 2 130,185 - - - - - 130,185Derivativesheld for trading 2 1,524,124 - - - - - 1,524,124Derivativesheld for fair valuehedging 3 - 7,423 1,228 818 (2,818) 53,357 60,008

Loans - 15,310,132 22,763,057 94,649,996 64,227,309 89,229,253 286,179,747Available-for-salefinancial assets 4 6,980,617 382,074 830,319 8,623,389 13,945,670 1,618,889 32,380,958Held-to-maturityfinancial assets - 450,324 285,028 3,168,496 4,495,626 2,093,677 10,493,151Other financial assets 291 4,726,718 - 1,051,329 - - 5,778,338

23,363,923 21,340,456 24,074,196 107,724,587 82,665,787 92,995,176 352,164,125

Financial liabilitiesFinancial liabilities heldfor trading 2 72,215 - - - - - 72,215Derivativesheld for trading 2 1,530,920 - - - - - 1,530,920Derivativesheld for fair valuehedging 3 - (1,940) 8,024 (21,395) (3,208) 985 (17,534)Deposits 5 120,740,656 11,948,306 25,019,977 79,534,694 11,143,670 3,827,016 252,214,319Debts 2,187 5,678,193 2,326,920 5,304,189 4,134,046 573,218 18,018,753Debentures 42,627 524,517 1,594,527 4,282,795 11,531,840 1,613,589 19,589,895Other financialliabilities - 10,837,979 716 76,221 6,732 221,578 11,143,226

122,388,605 28,987,055 28,950,164 89,176,504 26,813,080 6,236,386 302,551,794Off-balance sheet itemsCommitments 6 51,474,727 - - - - - 51,474,727Financialguarantee contracts 7 3,201,644 - - - - - 3,201,644

54,676,371 - - - - - 54,676,371

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(In millions of Korean won) December 31, 2016On

demandUp to

1 month1-3

months3-12

months1-5years

Over 5years Total

Financial assetsCash and due fromfinancial institutions 1 6,146,827 158,794 302,774 221,887 - - 6,830,282Financial assets held fortrading 2 7,826,697 - - - - - 7,826,697Financial assetsdesignated at fairvalue through profit orloss 2 129,535 - - - - - 129,535Derivatives held fortrading 2 2,736,840 - - - - - 2,736,840Derivatives held for fairvalue hedging 3 - 4,039 1,722 1,791 (3,473) 53,185 57,264Loans - 14,900,098 23,401,467 82,205,491 64,172,410 88,571,195 273,250,661Available-for-salefinancial assets 4 6,014,328 535,451 1,542,125 5,506,765 13,070,553 2,365,520 29,034,742Held-to-maturityfinancial assets - 172,694 408,549 1,035,711 4,918,815 3,426,234 9,962,003Other financial assets - 3,225,789 - 1,122,047 - - 4,347,836

22,854,227 18,996,865 25,656,637 90,093,692 82,158,305 94,416,134 334,175,860

Financial liabilitiesFinancial liabilities heldfor trading 2 73,238 - - - - - 73,238Derivatives held fortrading 2 2,769,675 - - - - - 2,769,675Derivatives held for fairvalue hedging 3 - 3,462 (5,306) (8,333) (39,870) - (50,047)Deposits 5 114,690,384 13,828,525 24,751,241 71,868,404 10,294,522 3,790,529 239,223,605Debts 1,027 5,504,309 2,218,672 4,120,280 4,224,025 116,023 16,184,336Debentures 52,188 1,281,867 1,383,926 3,773,687 7,192,288 2,306,476 15,990,432Other financial liabilities - 9,522,926 717 77,912 10,758 82,421 9,694,734

117,586,512 30,141,089 28,349,250 79,831,950 21,681,723 6,295,449 283,885,973

Off-balance sheet itemsCommitments 6 54,261,648 - - - - - 54,261,648Financial guaranteecontracts 7 3,361,307 - - - - - 3,361,307

57,622,955 - - - - - 57,622,955

1 The amounts of 11,911,201 million and 7,859,440 million, which are restricted amount due from the financialinstitutions as of September 30, 2017 and December 31, 2016, respectively, are excluded.

2 Financial assets held for trading, financial assets designated at fair value through profit or loss, financial liabilities heldfor trading and derivatives held for trading are not managed by contractual maturity because they are held for tradingor redemption before maturity. Therefore, the carrying amounts are classified as the ‘On demand’ category. However,the cash flows of the embedded derivatives (e.g. conversion options and others) which are separated from their hostcontracts are considered in the cash flows of the host contracts.

3 Derivative instruments held for hedging are shown at net amounts of cash inflows and outflows by remainingcontractual maturity.

4 Equity investments in financial assets classified as available-for-sale are generally included in the ‘On demand’category as most are available for sale at anytime. However, in the case of equity investments which are restricted forsale, these are classified in the maturity section to which the end of the restriction period applies.

5 Deposits that are contractually repayable on demand or on short notice are classified under the ‘On demand’ category.6 Unused lines of credit within commitments are included under the ‘On demand’ category as payments can be requiredupon request.

7 Financial guarantee contracts are included under the ‘On demand’ category based on the earliest period that thecontracts can be executed.

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The remaining contractual cash flows of derivatives held for cash flow hedging as of September 30,2017 and December 31, 2016, are as follows:

(In millions of Korean won) September 30, 2017Up to1 month

1-3months

3-12months

1-5years

Over 5years Total

Cash flow to be receivedof net settlementderivatives - - - - - -Cash flow to be paid ofnet settlementderivatives 143 1,000 3,320 11,272 - 15,735

(In millions of Korean won) December 31, 2016Up to1 month

1-3months

3-12months

1-5years

Over 5years Total

Cash flow to be receivedof net settlementderivatives 69 - 152 - - 221Cash flow to be paid ofnet settlementderivatives 60 3 - - - 63

4.4 Market risk

4.4.1 Concept

Market risk is the risk of possible losses which arise from changes in market factors, such as interestrate, stock price, foreign exchange rate and other market factors, and incurred in securities, derivativesand others. The most significant risks associated with trading positions are interest rate risks andcurrency risks, and other risks include stock price risks. In addition, the Group is exposed to interestrate risks associated with non-trading positions. The Group classifies exposures to market risk intoeither trading or non-trading positions for managerial purpose.

4.4.2 Risk management

The Group sets internal capital limits for market risk and interest rate risk and monitors the risks tomanage the risk of trading and non-trading positions. The Group maintains risk management systemsand procedures, such as trading policies and procedures, market risk management guidelines fortrading positions and ALM risk management guidelines for non-trading positions in order to managemarket risk efficiently. The procedures mentioned are implemented with approval from the RiskManagement Committee and Risk Management Council.

The Group establishes market risk management policy, sets position limits, loss limits and VaR limitsof each business group and approves newly developed products through its Risk ManagementCouncil. The Market Risk Management Subcommittee, which is chaired by the Chief Risk Officer(CRO), is the decision maker and sets position limits, loss limits, VaR limits, sensitivity limits andscenario loss limits for each division, at the level of each individual business department.

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The Asset-Liability Management Committee (ALCO) determines the operational standards of interestand commission, the details of establishment and prosecution of the Asset Liability Management(ALM) policies and enacts and amends relevant guidelines. The Risk Management Council monitorsthe establishment and enforcement of ALM risk management policies and enact and amend ALM riskmanagement guidelines. The interest rate risk limit is set based on the future assets/liabilities positionand interest rate volatility estimation reflects the annual work plan. The Financial PlanningDepartment and Risk Management Department measure and monitor the interest risk status andlimits on a regular basis. The status and limits of interest rate risks, such as interest rate EaR,duration gap and interest rate VaR, are reported to the ALCO and Risk Management Council on amonthly basis and to the Risk Management Committee on a quarterly basis. To ensure adequacy ofinterest rate and liquidity risk management, the Risk Management Department assigns the limits,monitors and reviews the risk management procedures and tasks conducted by the FinancialPlanning Department. Also, the Risk Management Department independently reports relatedinformation to management.

4.4.3 Trading Position

Definition of a trading position

Trading positions subject to market risk management are interest rate, stock price positions for short-term profit-taking and others. Also, they include all foreign exchange rate positions. The basicrequirements of trading positions are defined under the Trading Policy and Guideline, are as follows:

– The trading position is not restricted for purchase and sale, is measured daily at fair value, and itssignificant inherent risks are able to be hedged in the market.

– The criteria for classification as a trading position are clearly defined in the Trading Policy andguideline, and separately managed by the trading department.

– The trading position is operated in accordance with the documented trading strategy andmanaged through position limits.

– The operating department or professional dealers have an authority to enforce a deal on thetrading position within predetermined limits without pre-approval.

– The trading position is reported periodically to management for the purpose of the Group’s riskmanagement.

Observation method on market risk arising from trading positions

The Group calculates VaR to measure the market risk by using market risk management systems onthe entire trading portfolio. Generally, the Group manages market risk on the trading portfolio. Inaddition, the Group controls and manages the risk of derivative trading based on the regulations andguidelines formulated by the Financial Supervisory Service.

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Value at Risk (VaR)

i. Value at Risk (VaR)

The Group uses the Value-at-Risk methodology to measure the market risk of trading positions.

The Group now uses the ten-day VaR, which estimates the maximum amount of loss that could occurin ten days under an historical simulation model which is considered to be a full valuation method.The distributions of portfolio's value changes are estimated based on the data over the previous 250business days, and ten-day VaR is calculated by subtracting net present market value from the valuemeasured at a 99% confident level of portfolio's value distribution results.

VaR is a commonly used market risk measurement technique. However, the method has someshortcomings. VaR estimates possible losses over a certain period at a particular confidence levelusing past market movement data. Past market movements are, however, not necessarily a goodindicator of future events, as there may be conditions and circumstances in the future that the modeldoes not anticipate. As a result, the timing and magnitude of the actual losses may vary depending onthe assumptions made at the time of the calculation. In addition, the time periods used for the model,generally one or ten days, are assumed to be a sufficient holding period before liquidating therelevant underlying positions. If these holding periods are not sufficient, or too long, the VaR resultsmay understate or overstate the potential loss.

The Group uses an internal model (VaR) to measure general risk, and a standard method to measureeach individual risk. When the internal model is not permitted for certain market risk, the Group usesthe standard method. Therefore, the market risk VaR may not reflect the market risk of eachindividual risk and some specific positions.

ii. Back-Testing

Back-testing is conducted on a daily basis to validate the adequacy of the VaR model. In back-testing, the Group compares both the actual and hypothetical profit and loss with the VaRcalculations.

iii. Stress Testing

Stress testing is carried out to analyze the impact of abnormal market situations on the trading andavailable-for-sale portfolio. It reflects changes in interest rates, stock prices, foreign exchange rates,implied volatilities of options and other risk factors that have significant influence on the value of theportfolio. The Group uses historical scenarios and hypothetical scenarios for the analysis of abnormalmarket situations. Stress testing is performed at least once every quarter.

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VaR at a 99%, excluding Stressed Value at Risks, confidence level of interest rate, stock price andforeign exchange rate risk for trading positions with a ten-day holding period as of September 30,2017 and December 31, 2016, are as follows:

(In millions of Korean won) September 30, 2017Average Minimum Maximum Ending

Interest rate risk 22,137 14,313 42,155 21,599Stock price risk 918 757 1,287 1,191Foreign exchange rate risk 32,053 12,405 38,918 36,845Deduction of diversification effect (36,777)

Total VaR 23,132 16,498 30,247 22,858

(In millions of Korean won) December 31, 2016Average Minimum Maximum Ending

Interest rate risk 15,683 10,817 19,538 14,906Stock price risk 1,757 726 2,269 1,201Foreign exchange rate risk 16,493 10,123 22,206 10,123Deduction of diversification effect (6,477)

Total VaR 19,018 11,558 28,519 19,753

The required equity capital using the standard method related to the positions which are notmeasured by VaR as of September 30, 2017 and December 31, 2016, is as follows:

(In millions of Korean won) September 30, 2017 December 31, 2016Interest rate risk 89,506 15,162Stock price risk 5,737 4,817Foreign exchange rate risk 422 -

95,665 19,979

Details of risk factors

i. Interest rate risk

Trading position interest rate risk usually arises from debt securities denominated in Korean won. TheGroup’s trading strategy is to benefit from short-term movements in the prices of debt securitiesarising from changes in interest rates. The Group manages interest rate risk on major tradingportfolios using market value-based tools such as VaR and sensitivity analysis (Price Value of a BasisPoint: PVBP).

ii. Stock price risk

Stock price risk only arises from trading securities denominated in Korean won as the Group does nothave any trading exposure to shares denominated in foreign currencies. The trading securitiesportfolios in Korean won are composed of exchange-traded stocks and derivative instruments linkedto stock with strict limits on diversification.

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iii. Foreign exchange rate risk

Foreign exchange rate risk arises from holding assets and liabilities denominated in foreign currencyand foreign currency derivatives. Net foreign currency exposure mostly occurs from the foreign assetsand liabilities which are denominated in US dollars and Chinese yuan. The Group sets both loss limitsand net foreign currency exposure limits and manages comprehensive net foreign exchangeexposures which consider both trading and non-trading portfolios.

4.4.4 Non-trading Position

i. Definition of non-trading position

Managed interest rate risk in non-trading position includes on or off-balance sheet assets, liabilitiesand derivatives that are sensitive to interest rate, except trading position for market risk. The interestrate sensitive assets and liabilities are interest-bearing assets and liabilities that create interestincome and expenses.

ii. Observation method on market risk arising from non-trading position

Interest rate risk occurs due to mismatches on maturities and interest rate reset periods betweeninterest-bearing assets and liabilities. The Group manages the risk through measuring and managinginterest rate VaR and EaR that are maximum expected decreases in net asset value (NPV) and netinterest income (NII) for one year, respectively, arising from unfavorable changes in market interestrate.

iii. Interest Rate VaR

Interest rate VaR is the maximum possible loss due to interest rate risk under a normal distribution ata 99.90% confidence level. The measurement results of risk as of September 30, 2017 andDecember 31, 2016, are as follows:

(In millions of Korean won) September 30, 2017 December 31, 2016Interest Rate VaR 238,192 75,990

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4.4.5 Financial Assets and Liabilities in Foreign Currencies

Financial assets and liabilities in foreign currencies as of September 30, 2017 and December 31,2016, are as follows:

(In millions of Korean won) September 30, 2017USD JPY EUR GBP CNY Others Total

Financial assetsCash and due fromfinancial institutions 1,625,605 238,545 177,154 30,079 881,831 222,146 3,175,360

Financial assets held fortrading 1,008,544 108,166 66,410 8,998 - 19,816 1,211,934

Derivatives held for trading 53,995 - - - 1,047 - 55,042Derivatives held for hedging 8,978 - - - - - 8,978Loans 11,252,379 274,068 1,210,399 9,193 704,677 224,398 13,675,114Available-for-salefinancial assets 2,000,078 82,038 40,808 - 40,785 22,235 2,185,944Held-to-maturityfinancial assets 1,089,365 - - - 5,164 - 1,094,529Other financial assets 1,862,294 57,978 31,034 4,934 23,756 32,091 2,012,087

18,901,238 760,795 1,525,805 53,204 1,657,260 520,686 23,418,988

Financial liabilitiesDerivatives held for trading 80,675 155 17 - 217 108 81,172Derivatives held for hedging 49,612 - - - - - 49,612Deposits 7,293,531 583,273 317,293 48,034 1,120,115 391,346 9,753,592Debts 8,436,416 45,388 73,392 790 70,767 15,125 8,641,878Debentures 3,133,316 - - - - - 3,133,316Other financial liabilities 2,503,375 58,679 46,438 2,004 26,764 19,658 2,656,918

21,496,925 687,495 437,140 50,828 1,217,863 426,237 24,316,488Off-balance sheet items 11,984,396 8,670 44,994 477 288,392 12,796 12,339,725

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(In millions of Korean won) December 31, 2016USD JPY EUR GBP CNY Others Total

Financial assetsCash and due fromfinancial institutions 2,059,412 208,000 147,467 17,224 600,682 257,095 3,289,880

Financial assets held fortrading 158,599 123,733 2,545 - - - 284,877

Derivatives held for trading 71,843 - - - - - 71,843Derivatives held for hedging 5,917 - - - - - 5,917Loans 10,762,600 342,100 895,208 5,798 552,966 178,361 12,737,033Available-for-salefinancial assets 1,508,838 91,017 - - 35,873 871 1,636,599Held-to-maturityfinancial assets 1,148,075 - - - - - 1,148,075Other financial assets 916,058 245,827 35,981 30,792 172,437 85,899 1,486,994

16,631,342 1,010,677 1,081,201 53,814 1,361,958 522,226 20,661,218

Financial liabilitiesDerivatives held for trading 73,379 - 29 - - - 73,408Derivatives held for hedging 63,634 - - - - - 63,634Deposits 6,965,320 596,607 457,418 52,719 791,027 399,516 9,262,607Debts 6,828,519 169,507 83,105 279 85,123 37,492 7,204,025Debentures 3,468,940 - - - - - 3,468,940Other financial liabilities 1,447,380 52,275 534,224 1,429 176,381 50,735 2,262,424

18,847,172 818,389 1,074,776 54,427 1,052,531 487,743 22,335,038Off-balance sheet items 13,072,623 822 1,268 - 131,210 75,500 13,281,423

4.5 Operational Risk

4.5.1 Concept

The Group defines operational risk as risk of loss resulting from inadequate or failed internalprocesses, people, systems and external events. The operational risk includes financial and non-financial risks.

4.5.2 Risk Management

The purpose of operational risk management is not only to comply with requirements of regulatoryauthorities but is also to establish an integrated system to cultivate enterprise culture that valuesimportance of risk management, strengthen internal controls, improve processes and provide withtimely feedback to management so that eventually mitigate operational risk of the company. Inaddition, the Group established Business Continuity Planning (BCP) to ensure critical businessfunctions can be maintained, or restored, in the event of material disruptions arising from internal orexternal events. It has constructed replacement facilities as well as has carried out full scale test forhead office and IT departments to test its BCPs.

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4.6 Capital Management

The Group complies with the capital adequacy standard established by the Financial ServicesCommission. The capital adequacy standard is based on Basel III revised by Basel Committee onBanking Supervision in Bank for International Settlements in June 2011, and was implemented inKorea in December 2013. The Group is required to maintain a minimum Common Equity Tier 1 ratioof at least 4.5%, a minimum Tier 1 ratio of 6.0% and a minimum Total Regulatory Capital of 8.0% asof September 30, 2017. Capital Conservation Buffer of 1.25% and Capital Requirement of DomesticSystemically Important Bank(D-SIB) of 0.5% are additionally applied. Therefore, the Group is requiredto maintain a capital ratio including a minimum capital ratio and additional capital requirements (aCommon Equity Tier 1 Ratio of 6.25% (December 31, 2016 : 5.375%), a Tier 1 Ratio of 7.75%(December 31, 2016 : 6.875%), and a Total Regulatory Capital Ratio of 9.75% (December 31, 2016 :8.875%)).

The Group’s equity capital is classified into three categories in accordance with Detailed SupervisoryRegulations on Banking Business:

- Common Equity Tier 1 Capital: Common Equity Tier 1 Capital represents the issued capital thattakes the first and proportionately greatest share of any losses and represents the most subordinatedclaim in liquidation of the Group, and not repaid outside of liquidation. It includes common sharesissued, capital surplus, retained earnings, non-controlling interests of consolidated subsidiaries,accumulated other comprehensive income, other capital surplus and others.

- Additional Tier 1 Capital: Additional Tier 1 Capital includes perpetual instruments issued by theGroup that meet the criteria for inclusion in Additional Tier 1 capital, and stock surplus resulting fromthe issue of instruments included in Additional Tier 1 capital and others.

- Tier 2 Capital: Tier 2 Capital represents the capital that takes the proportionate share of losses inthe liquidation of the Group. Tier 2 Capital includes a fund raised by issuing subordinated debenturesmaturing in not less than 5 years that meet the criteria for inclusion in Tier 2 capital, and theallowance for loan losses which are accumulated for assets classified as normal or precautionary inaccordance with Regulations on Supervision of Banking Business and others.

Risk-weighted asset means the assets weighted according to the inherent risks in the total assets andthe possible losses resulting from the errors of internal process and external events which the Groupshould cover. The Group calculates risk-weighted asset by each risk (credit risk, market risk andoperational risk) based on Detailed Regulations on Supervision of Banking Business and uses it forits capital ratio calculation. The Group complied with external capital adequacy requirements as ofSeptember 30, 2017 and December 31, 2016.

In addition to the capital ratio, the Group assesses its adequacy of capital by using the internalassessment and management policy of the capital adequacy. The assessment of the capitaladequacy is conducted by comparing available capital (actual amount of available capital) andinternal capital (amount of capital enough to cover all significant risks under target credit rate set bythe Group). The Group monitors the soundness of finance and provides risk adjusted basis forperformance review using the assessment of the capital adequacy. The internal capital is calculatedby adding the stress testing results and other required items to the total internal capitals which arecalculated for each risk.

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The Risk Management Council of the Group determines the Group’s risk appetite and allocatesinternal capital by risk type and business group. Each business group efficiently operates its capitalwithin range of granted internal capital. The Risk Management Department of the Group monitors amanagement of the limit on internal capital and reports the results to management and the RiskManagement Council. The Group maintains the adequacy of capital through proactive review andapproval of the Risk Management Committee when the internal capital is expected to exceed thelimits.

Details of the Group's capital adequacy calculation in line with Basel III requirements as of September30, 2017 and December 31, 2016, are as follows:

(In millions of Korean won) September 30,2017 December 31, 2016Equity Capital 26,282,066 24,578,862Tier I Capital 24,411,420 22,343,308Common Equity Tier 1 Capital 24,411,420 22,343,308Tier II Capital 1,870,646 2,235,554Risk-weighted assets: 162,454,920 150,648,459Credit risk 1 146,397,851 136,469,707Market risk 2 5,890,878 3,883,542Operational risk 3 10,166,191 10,295,210Equity Capital (%): 16.18 16.32Tier I Capital (%) 15.03 14.83Common Equity Tier 1 Capital (%) 15.03 14.83

1 Credit risk-weighted assets are measured using the Internal Rating-Based Approach andStandardized Approach.

2Market risk-weighted assets are measured using the Internal Model-Based Approach andStandardized Approach.

3 Operational risk-weighted assets are measured using the Advanced Measurement Approach.

5. Segment Information

5.1 Overall Segment Information and Business Segments

The Group is organized into Corporate Banking, Retail Banking and Other Activities. These businessdivisions are based on the nature of the products and services provided, the type or class ofcustomer, and the Group’s management organization.

- Corporate banking : The activities within this segment include providing credit, deposit products andother related financial services to large, small and medium-sized enterprises and SOHOs.- Retail banking : The activities within this segment include providing credit, deposit products andother related financial services to individuals and households.- Other activities : The activities within this segment include trading activities in securities andderivatives, funding and other supporting activities.

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Financial information by business segment as of and for the nine-month period ended September 30,2017 is as follows:

(In millions of Korean won) September 30, 2017CorporateBanking

RetailBanking Others

Intra-groupAdjustment Total

Operating revenues from externalcustomers 1,537,993 1,975,075 1,195,793 - 4,708,861Segment operating revenue(expense) 17,185 - (7,714) (9,471) -

1,555,178 1,975,075 1,188,079 (9,471) 4,708,861Net interest income 1,889,344 1,951,413 131,685 65 3,972,507Interest income 2,637,264 2,902,057 597,423 (9,486) 6,127,258Interest expense (747,920) (950,644) (465,738) 9,551 (2,154,751)Net fee and commission income 175,031 435,904 308,198 (9,141) 909,992Fee and commission income 233,257 486,852 385,104 (14,523) 1,090,690Fee and commission expense (58,226) (50,948) (76,906) 5,382 (180,698)Net gains(losses) on financial assets/liabilities at fair value through profit orloss (307) - 110,293 - 109,986Net other operating income(expense) (508,890) (412,242) 637,903 (395) (283,624)General and administrative expense (646,961) (1,269,055) (501,990) 1,834 (2,416,172)Operating profit before provision forcredit losses 908,217 706,020 686,089 (7,637) 2,292,689Provision for credit losses (84,560) (83,989) (740) 236 (169,053)Operating profit 823,657 622,031 685,349 (7,401) 2,123,636Share of profit of associates - - 31,186 - 31,186Net other non-operatingincome(expense) 1,954 - 256,726 (219,600) 39,080Segment profit before income taxexpense 825,611 622,031 973,261 (227,001) 2,193,902Income tax expense (200,203) (150,532) (1,240) (664) (352,639)Profit for the period 625,408 471,499 972,021 (227,665) 1,841,263Profit attributable to the shareholderof the parent company 625,408 471,499 972,021 (227,665) 1,841,263Profit attributable to non-controllinginterests - - - - -Total assets 1 117,323,006 126,259,223 86,885,181 (3,860,146) 326,607,264Total liabilities 1 99,399,883 146,200,043 57,224,546 (1,270,983) 301,553,489

1 Amounts before intra-group transaction adjustment.

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Financial information by business segment as of and for the nine-month period ended September 30,2016 is as follows:

(In millions of Korean won) September 30, 2016CorporateBanking

RetailBanking Others

Intra-groupAdjustment Total

Operating revenues from externalcustomers 1,302,624 1,651,337 1,369,268 - 4,323,229Segment operating revenue(expense) 27,733 - (10,270) (17,463) -

1,330,357 1,651,337 1,358,998 (17,463) 4,323,229Net interest income 1,694,006 1,730,376 104,849 401 3,529,632Interest income 2,458,404 2,793,447 659,986 (8,621) 5,903,216Interest expense (764,398) (1,063,071) (555,137) 9,022 (2,373,584)Net fee and commission income 176,769 387,885 266,891 (12,212) 819,333Fee and commission income 218,539 444,502 330,540 (14,209) 979,372Fee and commission expense (41,770) (56,617) (63,649) 1,997 (160,039)Net gains(losses) on financial assets/liabilities at fair value through profit orloss (5,393) - 24,354 - 18,961Net other operating income(expense) (535,025) (466,924) 962,904 (5,652) (44,697)General and administrative expense (561,960) (1,264,757) (724,076) 930 (2,549,863)Operating profit before provision forcredit losses 768,397 386,580 634,922 (16,533) 1,773,366Provision for credit losses (365,861) 39,799 31,990 (28) (294,100)Operating profit 402,536 426,379 666,912 (16,561) 1,479,266Share of profit of associates - - 8,573 - 8,573Net other non-operatingincome(expense) (467) - 72,747 (39,435) 32,845Segment profit before income taxexpense 402,069 426,379 748,232 (55,996) 1,520,684Income tax expense (97,780) (103,184) (162,883) 8,117 (355,730)Profit for the period 304,289 323,195 585,349 (47,879) 1,164,954Profit attributable to the shareholderof the parent company 304,289 323,195 585,349 (47,879) 1,164,954Profit attributable to non-controllinginterests - - - - -Total assets 1 109,500,342 122,806,490 78,135,238 (3,375,700) 307,066,370Total liabilities 1 91,685,643 140,082,958 53,951,579 (1,978,812) 283,741,368

1 Amounts before intra-group transaction adjustment as of December 31, 2016.

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5.2 Services and Geographical Segments

5.2.1 Services Information

Operating revenues from external customers by services for the nine-month periods endedSeptember 30, 2017 and 2016, are as follows:

(In millions of Korean won)September 30, 2017 September 30, 2016

Corporate banking service 1,537,993 1,302,624Retail banking service 1,975,075 1,651,337Other service 1,195,793 1,369,268

4,708,861 4,323,229

5.2.2 Geographical Information

Geographical operating revenues from external customers for the nine-month periods endedSeptember 30, 2017 and 2016, and major non-current assets as of September 30, 2017 andDecember 31, 2016, are as follows:

(In millions of Korean won)September 30,

2017September 30,

2016December 31,

2016Revenues from

externalcustomers

Majornon-currentassets

Revenues fromexternalcustomers

Majornon-currentassets

Domestic 4,645,637 3,520,886 4,258,770 3,691,841United States 7,426 162 8,661 282New Zealand 4,287 79 3,976 128China 30,184 3,592 32,226 3,925Japan 3,079 1,595 3,914 1,964Myanmar 318 471 - -Vietnam 4,048 249 3,008 278Cambodia 5,407 1,209 4,655 1,216United Kingdom 8,475 118 8,019 149Intra-group adjustment - 1,202 - 1,202

4,708,861 3,529,563 4,323,229 3,700,985

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6. Financial Assets and Financial Liabilities

6.1 Classification and Fair Value

Carrying amount and fair values of financial assets and liabilities as of September 30, 2017 andDecember 31, 2016, are as follows:

(In millions of Korean won) September 30, 2017 December 31, 2016Carryingamount Fair value

Carryingamount Fair value

Financial assetsCash and due from financialinstitutions 18,739,502 18,739,911 14,681,846 14,682,043Financial assets held for tradingDebt securities 8,433,722 8,433,722 7,693,118 7,693,118Equity securities 270,698 270,698 61,230 61,230Others 72,230 72,230 72,349 72,349

8,776,650 8,776,650 7,826,697 7,826,697Financial assets designated at fairvalue through profit or lossDerivative linked securities 130,185 130,185 129,535 129,535Derivatives held for trading 1,540,686 1,540,686 2,745,979 2,745,979Derivatives held for hedging 50,979 50,979 50,466 50,466Loans 247,995,401 247,739,984 236,551,052 236,227,582Available-for-sale financial assetsDebt securities 24,232,504 24,232,504 21,807,445 21,807,445Equity securities 5,243,584 5,243,584 5,496,963 5,496,963Others 500 500 500 500

29,476,588 29,476,588 27,304,908 27,304,908Held-to-maturity financial assets 9,153,618 9,298,284 8,427,498 8,578,025Other financial assets 6,503,066 6,503,066 5,021,200 5,021,200

322,366,675 322,256,333 302,739,181 302,566,435Financial liabilitiesFinancial liabilities held for trading 72,215 72,215 73,238 73,238Derivatives held for trading 1,530,921 1,530,921 2,769,718 2,769,718Derivatives held for hedging 49,711 49,711 63,880 63,880Deposits 248,700,703 249,254,952 235,736,034 236,297,685Debts 17,776,492 17,791,745 15,934,409 15,937,153Debentures 18,511,721 18,796,210 14,959,692 15,334,856Other financial liabilities 13,533,876 13,533,877 12,097,059 12,097,068

300,175,639 301,029,631 281,634,030 282,573,598

The fair value is defined as the price that would be received to sell an asset or paid to transfer aliability in an orderly transaction between market participants. The Group discloses the fair value ofeach class of assets and liabilities in a way that permits it to be compared with its carrying amount atthe end of each reporting period. The best evidence of fair value of financial instruments is a quotedprice in an active market.

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Methods of determining fair value for financial instruments are as follows:

Cash and due fromfinancial institutions

The carrying amounts of cash and demand due from financial institutionsand payment due from financial institutions are reasonable approximationof fair values. These financial instruments do not have a fixed maturity andare receivable on demand. Fair value of ordinary due from financialinstitutions is measured using DCF model (Discounted Cash Flow Model).

Investment securities The fair value of financial instruments that are quoted in active markets isdetermined using the quoted prices. Fair value is determined through theuse of independent third-party pricing services where quoted prices are notavailable. Pricing services use one or more of the following valuationtechniques including DCF Model, FCFE(Free Cash Flow to Equity Model),Comparable Company Analysis, Dividend Discount Model, Risk AdjustedDiscount Rate Method, and Net Asset Value Method.

Loans DCF Model is used to determine the fair value of loans. Fair value isdetermined by discounting the expected cash flows, which are contractualcash flows adjusted by the expected prepayment rate, at appropriatediscount rate.

Derivatives For exchange traded derivatives, quoted price in an active market is usedto determine fair value and for OTC derivatives, fair value is determinedusing valuation techniques. The Group uses internally developed valuationmodels that are widely used by market participants to determine fair valuesof plain OTC derivatives including options, interest rate swaps, andcurrency swaps, based on observable market parameters. However, somecomplex financial instruments are valued using appropriate modelsdeveloped from generally accepted market valuation models including theFinite Difference Method, the Monte Carlo Simulation and the Tree modelor independent third-party valuation service. For OTC derivatives, the creditrisk of counterparty and the Group’s own credit risk are applied throughCredit Valuation Adjustment(CVA).

Deposits The carrying amount of demand deposits is regarded as representative offair value because they do not have a fixed maturity and are payable ondemand. Fair value of time deposits is determined using a DCF model. Fairvalue is determined by discounting the expected cash flows, which arecontractual cash flows adjusted by the expected prepayment rate, at anappropriate discount rate.

Debts The carrying amount of overdraft in foreign currency is regarded asrepresentative of fair value because they do not have a fixed maturity andare payable on demand. Fair value of other debts is determined using aDCF model discounting contractual future cash flows at an appropriatediscount rate.

Debentures Fair value is determined by using the valuations (DCF Model) ofindependent third-party pricing services, which are calculated using marketinputs.

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Other financial assetsand other financialliabilities

The carrying amounts are reasonable approximation of fair values. Thesefinancial instruments are temporary accounts used for other varioustransactions and their maturities are relatively short or not defined.However, fair value of finance lease liabilities is measured using a DCFmodel.

Fair value hierarchy

The Group believes that valuation methods used for measuring the fair values of financial instrumentsare reasonable and that the fair values recognized in the statements of financial position areappropriate. However, the fair values of the financial instruments recognized in the statements offinancial position may be different if other valuation methods or assumptions are used. Additionally,as there is a variety of valuation techniques and assumptions used in measuring fair value, it may bedifficult to reasonably compare the fair value with that of other financial institutions.

The Group classifies and discloses the fair value of the financial instruments into the following three-level hierarchy:

Level 1: The fair values are based on quoted prices (unadjusted) in active markets for identical assetsor liabilities that the entity can access at the measurement date.

Level 2: The fair values except for quoted prices included within Level 1 are based on inputs that areobservable for the asset or liability, either directly or indirectly.

Level 3: The fair values are based on unobservable inputs for the asset or liability.

The level in the fair value hierarchy within which the fair value measurement is categorized in itsentirety shall be determined on the basis of the lowest level input that is significant to the fair valuemeasurement in its entirety. For this purpose, the significance of an input is assessed against the fairvalue measurement in its entirety. If a fair value measurement uses observable inputs that requiresignificant adjustment based on unobservable inputs, that measurement is a Level 3 measurement.

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Fair value hierarchy of financial assets and liabilities measured at fair value in the statementsof financial position

The fair value hierarchy of financial assets and liabilities measured at fair value in the statements offinancial position as of September 30, 2017 and December 31, 2016, is as follows:

(In millions of Korean won) September 30, 2017Fair value hierarchy

Level 1 Level 2 Level 3 TotalFinancial assetsFinancial assets held for tradingDebt securities 2,658,442 5,775,280 - 8,433,722Equity securities 227,843 42,855 - 270,698Others 72,230 - - 72,230

2,958,515 5,818,135 - 8,776,650Financial assets designated at fairvalue through profit or lossDerivative linked securities - - 130,185 130,185

- - 130,185 130,185Derivatives held for trading - 1,524,039 16,647 1,540,686Derivatives held for hedging - 49,155 1,824 50,979Available-for-sale financial assetsDebt securities 8,645,255 15,587,249 - 24,232,504Equity securities 1 1,234,165 2,046,633 1,962,786 5,243,584Others - 500 - 500

9,879,420 17,634,382 1,962,786 29,476,58812,837,935 25,025,711 2,111,442 39,975,088

Financial liabilitiesFinancial liabilities held for trading 72,215 - - 72,215Derivatives held for trading - 1,530,043 878 1,530,921Derivatives held for hedging - 49,612 99 49,711

72,215 1,579,655 977 1,652,847

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(In millions of Korean won) December 31, 2016Fair value hierarchy

Level 1 Level 2 Level 3 TotalFinancial assetsFinancial assets held for tradingDebt securities 2,823,740 4,869,378 - 7,693,118Equity securities 34,131 27,099 - 61,230Others 72,349 - - 72,349

2,930,220 4,896,477 - 7,826,697Financial assets designated at fairvalue through profit or lossDerivative linked securities - - 129,535 129,535

- - 129,535 129,535Derivatives held for trading - 2,736,032 9,947 2,745,979Derivatives held for hedging - 49,003 1,463 50,466Available-for-sale financial assetsDebt securities 10,124,521 11,682,924 - 21,807,445Equity securities 1 1,001,541 2,649,967 1,845,455 5,496,963Others - 500 - 500

11,126,062 14,333,391 1,845,455 27,304,90814,056,282 22,014,903 1,986,400 38,057,585

Financial liabilitiesFinancial liabilities held for trading 73,238 - - 73,238Derivatives held for trading - 2,769,596 122 2,769,718Derivatives held for hedging - 63,694 186 63,880

73,238 2,833,290 308 2,906,836

1 The amounts of equity securities carried at cost in “Level 3” which do not have a quoted marketprice in an active market and cannot be measured reliably at fair value are 104,220 million and54,553 million as of September 30, 2017 and December 31, 2016, respectively. These equity

securities are carried at cost because it is practically difficult to quantify the intrinsic values of theequity securities issued by unlisted public and non-profit entities. In addition, unlisted equitysecurities invested in online bank and project financing, which are in their initial phase of businessoperation, are also measured at cost because the variability of estimated cash flows is significantand the probability of the various estimates cannot be reasonably assessed. The Group has no planto dispose of the financial instruments in the near future.

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Valuation techniques and the inputs used in the fair value measurement of financial assetsand liabilities classified as Level 2

Valuation techniques and inputs of financial assets and liabilities measured at fair value in thestatements of financial position and classified as Level 2 as of September 30, 2017 and December31, 2016, are as follows:

(In millions of Korean won)Fair value

Valuationtechniques Inputs

September 30, 2017 December 31, 2016Financial assetsFinancial assets held for tradingDebt securities 5,775,280 4,869,378 DCF model Discount rate

Equity securities 42,855 27,099Net asset valuemethod

Price of the underlyingasset such as debenture,stock and others

5,818,135 4,896,477

Derivatives held for trading 1,524,039 2,736,032DCF model,Closed Form,FDM

Discount rate, volatility,foreign exchange rate,stock price and others

Derivatives held for hedging 49,155 49,003DCF model,Closed Form,FDM

Discount rate, volatility,foreign exchange rateand others

Available-for-sale financial assetsDebt securities 15,587,249 11,682,924 DCF model Discount rate

Equity securities 2,046,633 2,649,967Net asset valuemethod

Price of the underlyingasset such as debenture,stock and others

Others 500 500 DCF model Discount rate17,634,382 14,333,39125,025,711 22,014,903

Financial liabilities

Derivatives held for trading 1,530,043 2,769,596DCF model,Closed Form,FDM

Discount rate, volatility,foreign exchange rate,stock price and others

Derivatives held for hedging 49,612 63,694DCF model,Closed Form,FDM

Discount rate, volatility,foreign exchange rateand others

1,579,655 2,833,290

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Fair value hierarchy of financial assets and liabilities whose fair value is disclosed

The fair value hierarchy of financial assets and liabilities whose fair value is disclosed as ofSeptember 30, 2017 and December 31, 2016, is as follows:

(In millions of Korean won) September 30, 2017Fair value hierarchy

Level 1 Level 2 Level 3 TotalFinancial assetsCash and duefrom financial institutions 1 2,853,262 14,845,008 1,041,641 18,739,911Loans - - 247,739,984 247,739,984Held-to-maturity financial assets 1,212,406 8,085,878 - 9,298,284Other financial assets 2 - - 6,503,066 6,503,066

4,065,668 22,930,886 255,284,691 282,281,245Financial liabilitiesDeposits 1 - 120,738,383 128,516,569 249,254,952Debts 1 - 29,163 17,762,582 17,791,745Debentures - 18,796,210 - 18,796,210Other financial liabilities 3 - - 13,533,877 13,533,877

- 139,563,756 159,813,028 299,376,784

December 31, 2016(In millions of Korean won) Fair value hierarchy

Level 1 Level 2 Level 3 TotalFinancial assetsCash and duefrom financial institutions 1 2,555,151 11,391,432 735,460 14,682,043Loans - - 236,227,582 236,227,582Held-to-maturity financial assets 1,431,622 7,146,403 - 8,578,025Other financial assets 2 - - 5,021,200 5,021,200

3,986,773 18,537,835 241,984,242 264,508,850Financial liabilitiesDeposits 1 - 112,717,627 123,580,058 236,297,685Debts 1 - 70,624 15,866,529 15,937,153Debentures - 15,334,856 - 15,334,856Other financial liabilities 3 - - 12,097,068 12,097,068

- 128,123,107 151,543,655 279,666,762

1 The amounts included in Level 2 are the carrying amounts which are reasonable approximation ofthe fair values.

2 The amounts of other financial assets included in Level 3 are the carrying amounts which arereasonable approximation of the fair values as of September 30, 2017 and December 31, 2016.

3 The 13,533,460 million and 12,095,445 million of other financial liabilities included in Level 3are the carrying amounts which are reasonable approximation of fair values as of September 30,2017 and December 31, 2016, respectively.

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Valuation techniques and inputs used in the fair value measurement

Valuation techniques and inputs of financial assets and liabilities which are disclosed by the carryingamounts because it is a reasonable approximation of fair value are not subject to be disclosed.

Valuation techniques and inputs of financial assets and liabilities whose fair values are disclosed andclassified as Level 2 as of September 30, 2017 and December 31, 2016, are as follows:


ValuationTechniques Inputs

September 30,2017

December 31,2016

Financial assetsHeld-to-maturity financialassets 8,085,878 7,146,403 DCF model Discount rate

Financial liabilitiesDebentures 18,796,210 15,334,856 DCF model Discount rate

Valuation techniques and inputs of financial assets and liabilities whose fair values are disclosed andclassified as Level 3 as of September 30, 2017 and December 31, 2016, are as follows:


Valuationtechniques Inputs

Unobservableinputs

September 30,2017

December 31,2016

Financial assetsCash and due fromfinancial institutions

1,041,641 735,460 DCF model Credit spread,other spread,interest rate

Credit spread,other spread

Loans 247,739,984 236,227,582 DCF model Credit spread,other spread,prepayment rate,interest rate

Credit spread,other spread,prepayment rate

248,781,625 236,963,042Financial liabilitiesDeposits 128,516,569 123,580,058 DCF model Other spread,

prepayment rate,interest rate

Other spread,prepayment rate

Debts 17,762,582 15,866,529 DCF model Other spread,interest rate

Other spread

Other financial liabilities 417 1,614 DCF model Other spread,interest rate

Other spread

146,279,568 139,448,201

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6.2 Level 3 of the Fair Value Hierarchy Disclosure

6.2.1 Valuation Policy and Process of Level 3 Fair Value

The Group uses external, independent and qualified third-party valuation service in addition to internalvaluation models to determine the fair value of the Group's assets at the end of every reportingperiod.

Where a reclassification between the levels of the fair value hierarchy occurs for a financial asset orliability, the Group’s policy is to recognize such transfers as having occurred at the beginning of thereporting period.

6.2.2 Changes in Fair Value (Level 3) Measured using Valuation Technique based on UnobservableInputs in Market

Changes in Level 3 of the fair value hierarchy for the nine-month periods ended September 30, 2017and 2016, are as follows:


Financial assetsat fair value

through profit orloss

Financialinvestments Net derivatives

Available-for-salefinancial assets Derivatives held

for tradingDerivatives heldfor hedgingEquity securities

Beginning balance 129,535 1,845,455 9,825 1,277Total gains or losses- Profit 4,670 3,597 (1,331) 579- Other comprehensiveexpenses - (14,674) - -

Purchases 185,000 297,533 8,812 -Sales - (169,125) - -Settlements (189,020) - (895) (131)Transfers out of Level 3 1 - - (642) -Ending balance 130,185 1,962,786 15,769 1,725

74



Financial assets atfair value throughprofit or loss

Financialinvestments Net derivatives

Available-for-salefinancial assets Derivatives held

for tradingDerivatives heldfor hedgingEquity securities

Beginning balance 70,198 1,553,539 (1,560) 714Total gains or losses- Profit or loss 5,496 20,017 (10,189) 2,859- Other comprehensiveincome - 34,792 - -

Purchases 40,000 403,357 9,503 -Sales - (147,347) - -Settlements (3,816) - 2,173 (89)Transfers into Level 3 1 - - 8,815 -Transfers out of Level 3 1 - (17,924) - -Ending balance 111,878 1,846,434 8,742 3,484

1 Changes in levels for the financial instruments occurred due to the change in the availability ofobservable market data.

In relation to changes in Level 3 of the fair value hierarchy, total gains or losses recognized in profit orloss for the period, and total gains or losses for the period included in profit or loss for financialinstruments held at the end of the reporting period in the statements of comprehensive income for thenine-month periods ended September 30, 2017 and 2016, are as follows:

(In millions of Korean won) September 30, 2017Net gains on financialassets/liabilities at fair

value through profit or lossOther operating

incomeTotal gains included in profit or loss for theperiod 3,339 4,176

Total gains or losses for the period includedin profit or loss for financial instrumentsheld at the end of the reporting period 2,762 (64)

(In millions of Korean won) September 30, 2016Net losses from financialassets/liabilities at fair

value through profit or lossOther operating

incomeTotal gains or losses included in profit or lossfor the period (4,693) 22,876

Total gains or losses for the period includedin profit or loss for financial instrumentsheld at the end of the reporting period (4,234) 1,225

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6.2.3 Sensitivity Analysis of Changes in Unobservable Inputs

Information about fair value measurements using unobservable inputs as of September 30, 2017, is asfollows:

(In millions of Korean won)

Fair valueValuationtechniques Inputs

Unobservableinputs

Range ofunobservableinputs (%)

Relationship ofunobservable inputs to

fair valueFinancial assetsFinancial assets designated at fair value through profit or loss

Derivativelinkedsecurities

130,185 MonteCarloSimulation

Price of the underlying asset,interest rate, dividend yield,volatility of the underlyingasset, correlation of theunderlying assets

Volatility of theunderlying asset 16.92 ~ 22.31

Higher the volatility,higher the fair valuefluctuation

Correlation of theunderlying assets

14.60 ~ 57.68Higher the correlation,higher the fair valuefluctuation

Derivatives held for trading

Stock and index 2,725 Tree model

Price of the underlying asset,interest rate, volatility of theunderlying asset, dividendyield



Interest rate 85 DCF model Interest rate, loss given default Loss given default 0.53 Higher the loss rate,lower the fair value

Others 13,837MonteCarloSimulation,Tree model

Stock price, interest rate,volatility of the stock price,volatility of the interest rate

Volatility of thestock price 10.71 ~ 22.71


Volatility of theinterest rate 0.44


Derivatives held for hedging

Interest rate 1,824

DCF model,Closed Form,FDM,MonteCarloSimulation

Price of the underlying asset,interest rate, volatility of theunderlying asset

Volatility of theunderlying asset 3.02


Available-for-sale financial assets

Equity securities 1,962,786

DCF Model,ComparableCompanyAnalysis,Risk AdjustedDiscountRate Method

Growth rate, discount rate

Growth rate 0.00 ~ 0.50Higher the growth rate,higher the fair value

Discount rate 1.37 ~ 19.49 Lower the discount rate,higher the fair value

2,111,442

76




Unobservableinputs



fair valueFinancial liabilitiesDerivatives held for trading

Others 878MonteCarloSimulation,DCF model

Stock price, interest rate,volatility of the stock price,volatility of the interest rate,discount rate

Volatility of thestock price 14.23




Discount rate 2.18 ~ 2.28 Higher the discount rate,lower the fair value


Interest rate 99

DCF model,Closed Form,FDM,MonteCarloSimulation,Tree model




977

Information about fair value measurements using unobservable inputs as of December 31, 2016, is asfollows:



Unobservableinputs



fair valueFinancial assetsFinancial assets designated at fair value through profit or loss

Derivativelinkedsecurities

129,535 MonteCarloSimulation

Price of the underlying asset,interest rate, dividend yield,volatility of the underlyingasset, correlation of theunderlying assets



Correlation of theunderlying assets 24.77 ~ 73.07

Higher the correlation,higher the fair valuefluctuation

Derivatives held for trading

Stock and index 2,433 Tree model

Price of the underlying asset,interest rate, volatility of theunderlying asset, dividendyield



Currency andInterest rate

807 DCF model Interest rate, foreign exchangerate, loss given default

Loss given default 0.80 ~ 0.84 Higher the loss rate,lower the fair value

Others 6,707MonteCarloSimulation,Tree model

Stock price, interest rate,volatility of the stock price,volatility of the interest rate

Volatility of thestock price 14.82 ~ 30.97





Interest rate 1,463





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Unobservableinputs



fair valueAvailable-for-sale financial assets

Equity securities 1,845,455

DCF Model,ComparableCompanyAnalysis,Risk AdjustedDiscountRate Method

Growth rate, discount rate,liquidation value , recoveryrate of receivables acquisitioncost

Growth rate 0.00 ~ 0.50 Higher the growth rate,higher the fair value

Discount rate 1.49 ~ 18.49 Lower the discount rate,higher the fair value

Liquidation value 0.00Higher the liquidationvalue, higher the fairvalue

Recovery rate ofreceivables'acquisition cost

155.83Higher the recovery rate ofreceivables acquisitioncost, higher the fair value

1,986,400Financial liabilitiesDerivatives held for trading

Others 122 MonteCarloSimulation

Stock price, interest rate,volatility of the stock price,volatility of the interest rate,discount rate

Volatility of thestock price 14.82




Discount rate 2.09 Higher the discount rate,lower the fair value


Interest rate 186





308

Sensitivity analysis of changes in unobservable inputs

Sensitivity analysis of financial instruments is performed to measure favorable and unfavorablechanges in the fair value of financial instruments which are affected by unobservable parameters,using a statistical technique. When the fair value is affected by more than two input parameters, theamounts represent the most favorable or unfavorable. Amongst Level 3 financial instruments subjectto sensitivity analysis, there are derivative linked securities, equity-related derivatives, currency-related derivatives, interest rate-related derivatives and other derivatives whose fair value changesare recognized in profit or loss as well as equity securities and private equity funds whose fair valuechanges are recognized in profit or loss or other comprehensive income.

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Sensitivity analysis by type of instrument as a result of varying input parameters are as follows:

(In millions of Korean won) September 30, 2017Recognition in profit or loss Other comprehensive incomeFavorablechanges

Unfavorablechanges

Favorablechanges

Unfavorablechanges

Financial assetsFinancial assets designated at fairvalue through profit or lossDerivative linked securities 1 103 (165) - -Derivatives held for trading 2 355 (213) - -Derivatives held for hedging 2 - - - -Available-for-sale financial assets 3 - - 112,003 (58,743)

458 (378) 112,003 (58,743)Financial liabilitiesDerivatives held for trading 2 98 (104) - -Derivatives held for hedging 2 2 (2) - -

100 (106) - -

(In millions of Korean won) December 31, 2016Recognition in profit or loss Other comprehensive incomeFavorablechanges

Unfavorablechanges

Favorablechanges

Unfavorablechanges

Financial assetsFinancial assets designated at fairvalue through profit or lossDerivative linked securities 1 1,020 (1,176) - -Derivatives held for trading 2 399 (308) - -Derivatives held for hedging 2 9 (6) - -Available-for-sale financial assets 3 - - 118,637 (63,071)

1,428 (1,490) 118,637 (63,071)Financial liabilitiesDerivatives held for trading 2 111 (138) - -Derivatives held for hedging 2 3 (3) - -

114 (141) - -

1 For derivative linked securities, the changes in fair value are calculated by shifting principalunobservable input parameters such as the volatility of the underlying asset and the correlation ofthe underlying assets by ± 10%.

2 For derivatives, the changes in fair value are calculated by shifting principal unobservable inputparameters such as the price of the underlying asset, the volatility of the stock price, and thevolatility of interest rate by ± 10% or the loss given default ratio, discount rate by ± 1%.

3 For equity securities, the changes in fair value are calculated by shifting principal unobservable inputparameters such as discount rate (-1%~1%) and growth rate (0%~0.5%). For beneficiary certificates,their sensitivity from changes in inputs cannot be analyzed as a practical expedient. There were nosignificant inter-relationships between unobservable inputs that materially affect fair values.

79


6.2.4 Day One Gain or Loss

If the Group uses a valuation technique that incorporates data not obtained from observable marketsfor the fair value at initial recognition of financial instruments, there could be a difference between thetransaction price and the amount determined using that valuation technique. In these circumstances,the fair value of financial instruments is recognized as the transaction price and the difference isdeferred and not recognized in profit or loss, and is amortized by using the straight-line method overthe life of the financial instrument. If the fair value of the financial instruments is subsequentlydetermined using observable market inputs, the remaining deferred amount is recognized in profit orloss.

The aggregate difference yet to be recognized in profit or loss at the beginning and end of the periodand a reconciliation of changes in the balance of this difference are as follows:


2017September 30,

2016

Balance at the beginning of the period (A) (3,494) 9New transactions (B) (1,574) (3,869)Amounts recognized in profit or loss during the period(C= a+b) 728 198a. Amortization 728 343b. Settlement - (145)Balance at the end of the period (A+B+C) (4,340) (3,662)

6.3 Carrying Amounts of Financial Instruments by Category

Financial assets and liabilities are measured at fair value or amortized cost. The carrying amounts offinancial assets and liabilities by category as of September 30, 2017, are as follows:

(In millions of Korean won) Financial assets atfair value throughprofit or loss

Held fortrading

Financial assetsdesignated at fairvalue throughprofit or loss

Loans andreceivables

Available-for-salefinancialassets

Held-to-maturityfinancialassets

Derivativesheld forhedging Total

Financial assetsCash and due fromfinancial institutions - - 18,739,502 - - - 18,739,502Financial assets at fairvalue throughprofit or loss 8,776,650 130,185 - - - - 8,906,835Derivatives 1,540,686 - - - - 50,979 1,591,665Loans - - 247,995,401 - - - 247,995,401Financial investments - - - 29,476,588 9,153,618 - 38,630,206Other financial assets - - 6,503,066 - - - 6,503,066

10,317,336 130,185 273,237,969 29,476,588 9,153,618 50,979 322,366,675

80


(In millions of Korean won) Financial liabilities atfair value throughprofit or loss Financial liabilities at

amortized costDerivatives

held for hedging TotalHeld for tradingFinancial liabilitiesFinancial liabilities at fair valuethrough profit or loss 72,215 - - 72,215Derivatives 1,530,921 - 49,711 1,580,632Deposits - 248,700,703 - 248,700,703Debts - 17,776,492 - 17,776,492Debentures - 18,511,721 - 18,511,721Other financial liabilities - 13,533,876 - 13,533,876

1,603,136 298,522,792 49,711 300,175,639

The carrying amounts of financial assets and liabilities by category as of December 31, 2016, are asfollows:

(In millions of Korean won) Financial assets atfair value throughprofit or loss

Held fortrading

Financial assetsdesignated at fairvalue throughprofit or loss

Loans andreceivables

Available-for-salefinancialassets

Held-to-maturityfinancialassets

Derivativesheld forhedging Total

Financial assetsCash and due fromfinancial institutions - - 14,681,846 - - - 14,681,846Financial assets at fairvalue through profit orloss 7,826,697 129,535 - - - - 7,956,232Derivatives 2,745,979 - - - - 50,466 2,796,445Loans - - 236,551,052 - - - 236,551,052Financial investments - - - 27,304,908 8,427,498 - 35,732,406Other financial assets - - 5,021,200 - - - 5,021,200

10,572,676 129,535 256,254,098 27,304,908 8,427,498 50,466 302,739,181

(In millions of Korean won) Financial liabilities atfair value throughprofit or loss Financial liabilities at

amortized costDerivatives

held for hedging TotalHeld for tradingFinancial liabilitiesFinancial liabilities at fairvalue through profit or loss 73,238 - - 73,238Derivatives 2,769,718 - 63,880 2,833,598Deposits - 235,736,034 - 235,736,034Debts - 15,934,409 - 15,934,409Debentures - 14,959,692 - 14,959,692Other financial liabilities - 12,097,059 - 12,097,059

2,842,956 278,727,194 63,880 281,634,030

81


6.4 Transfer of Financial Assets

6.4.1 Transferred Financial Assets that are Derecognized in Their Entirety

The Group transferred loans and other financial assets that are derecognized in their entirety toSPEs, while the maximum exposure to loss(carrying amount) from its continuing involvement in thederecognized financial assets as of September 30, 2017 and December 31, 2016, are as follows :


Type ofcontinuinginvolvement

Classification offinancial

instruments

Carrying amount ofcontinuing

involvement instatement of

financial position

Fair value ofcontinuing


financial positionEAK ABS Ltd. Subordinated debt Available-for-sale

financial assets 7 7AP 1st SecuritizationSpecialty Co., Ltd.

Subordinated debt Available-for-salefinancial assets 430 430

Discovery 2nd SecuritizationSpecialty Co., Ltd.

Subordinated debt Available-for-salefinancial assets 5,946 5,946

EAK 2nd SecuritizationSpecialty Co., Ltd.


FK 1411 ABS Ltd. Subordinated debt Available-for-salefinancial assets 10,256 10,256

AP 3B ABS Ltd. Subordinated debt Available-for-salefinancial assets 9,707 9,707

AP 4D ABS Ltd. Senior debt Loans andreceivables 4,317 4,329


51,350 51,362

1 The recovered portion in excess of the consideration paid attributable to adjustments based on the agreementwith the National Happiness Fund for non-performing loans amounts to 2,989 million for the period endedSeptember 30, 2017.

82



Type ofcontinuinginvolvement

Classification offinancial

instruments

Carrying amount ofcontinuing


financial position

Fair value ofcontinuing


financial positionEAK ABS Ltd. Subordinated debt Available-for-sale

financial assets 7 7AP 1st SecuritizationSpecialty Co., Ltd.


Discovery 2nd SecuritizationSpecialty Co., Ltd.


EAK 2nd SecuritizationSpecialty Co., Ltd.


FK 1411 ABS Ltd. Subordinated debt Available-for-salefinancial assets 15,212 15,212

AP 3B ABS Ltd. Subordinated debt Available-for-salefinancial assets 14,374 14,374

AP 4D ABS Ltd.1 Senior debt Loans andreceivables 13,626 13,689


78,240 78,303

1 Recognized net gain from transferring loans to the SPEs amounts to 6,705 million.2 In addition to the above, the recovered portion in excess of the consideration paid attributable to adjustmentsbased on the agreement with the National Happiness Fund for non-performing loans amounts to 4,406million for the year ended December 31, 2016.

6.4.2 Securities under Repurchase Agreements and Loaned Securities

The Group continues to recognize the financial assets related to repurchase agreements andsecurities lending transactions on the statements of financial position since those transactions are notqualified for derecognition even though the Group transfers the financial assets. A financial asset issold under a reverse repurchase agreement to repurchase the same asset at a fixed price, or loanedunder a securities lending agreement to be returned as the same asset. Thus, the Group substantiallyretains all the risks and rewards of ownership of the financial asset. The amounts of transferredassets and related liabilities as of September 30, 2017 and December 31, 2016, are as follows:

(In millions of Korean won) September 30, 2017Carrying amount oftransferred assets

Carrying amount ofrelated liabilities

Securities under repurchase agreements 987,177 939,129Loaned securities 107,768 -- Government and public bonds 107,768 -

1,094,945 939,129

83


(In millions of Korean won) December 31, 2016Carrying amount oftransferred assets

Carrying amount ofrelated liabilities

Securities under repurchase agreements 1,376,782 1,261,371Loaned securities 108,062 -- Government and public bonds 108,062 -

1,484,844 1,261,371

6.5 Offsetting financial assets and financial liabilities

The Group enters into International Swaps and Derivatives Association ("ISDA") master nettingagreements and other similar netting arrangements with the Group’s derivative and spot exchangecounterparties. Similar netting agreements are also entered into with the Group’s reverse repurchase,securities and others. Pursuant to these agreements, in the event of default by one party, contractsare to be terminated and receivables and payables are to be offset. Further, as the law allows for theright to offset, domestic uncollected receivables balances and domestic accrued liabilities balancesare shown in its net settlement balance in the statement of financial position. Account receivables andaccount payables related to listed securities and derivatives or OTC derivatives settled by the centralcounterparty are included in the other financial instruments. As the Group has a legally enforceableright to set off the recognized amounts and intends to settle on a net basis, the net amounts of theother financial instruments balances are presented in the statement of financial position.

Details of financial assets subject to offsetting, enforceable master netting arrangements or similaragreements as of September 30, 2017 and December 31, 2016, are as follows:


Grossamounts ofrecognizedfinancialassets

Gross amountsof recognizedfinancial

liabilities offsetin the statementof financialposition

Net amounts offinancialassets

presented inthe statement of

financialposition

Related amounts not offset inthe statement of financial

position

Net amountFinancialinstruments

Cashcollateral

Derivatives held for trading 1,524,124 - 1,524,124 (1,029,334) (34,098) 460,692Derivatives held for hedging 50,979 - 50,979 (14,292) (12,312) 24,375Receivable spot exchange 3,599,611 - 3,599,611 (3,598,617) - 994Reverse repurchase 2,166,300 - 2,166,300 (2,166,300) - -Domestic exchangesettlement debits 23,828,734 (23,217,693) 611,041 - - 611,041

Other financial instruments 168,929 (152,058) 16,871 - - 16,87131,338,677 (23,369,751) 7,968,926 (6,808,543) (46,410) 1,113,973

84



Grossamounts ofrecognizedfinancialassets

Gross amountsof recognizedfinancial

liabilities offsetin the statementof financialposition

Net amounts offinancialassets

presented inthe statement of

financialposition


position


Cashcollateral

Derivatives held for trading 2,736,840 - 2,736,840 (1,622,583) (2,711) 1,111,546Derivatives held for hedging 50,466 - 50,466 (10,615) - 39,851Receivable spot exchange 2,557,327 - 2,557,327 (2,555,485) - 1,842Reverse repurchase 2,892,400 - 2,892,400 (2,892,400) - -Domestic exchangesettlement debits 19,854,611 (19,323,418) 531,193 - - 531,193

Other financial instruments 904 (897) 7 - - 728,092,548 (19,324,315) 8,768,233 (7,081,083) (2,711) 1,684,439

Details of financial liabilities subject to offsetting, enforceable master netting arrangements or similaragreements as of September 30, 2017 and December 31, 2016, are as follows:


Grossamounts ofrecognizedfinancialliabilities

Gross amountsof recognizedfinancial assetsoffset in thestatement offinancialposition

Net amounts offinancialliabilities

presented in thestatement offinancialposition


position


Cashcollateral

Derivatives held for trading 1,529,859 - 1,529,859 (1,118,943) (81,965) 328,951Derivatives held for hedging 49,711 - 49,711 (23,298) (7,341) 19,072Payable spot exchange 3,599,993 - 3,599,993 (3,598,617) - 1,376Repurchase 1 1,205,105 - 1,205,105 (1,004,451) - 200,654Domestic exchangesettlement credits 23,253,995 (23,217,693) 36,302 (36,302) - -

Other financial instruments 152,608 (152,058) 550 (432) - 11829,791,271 (23,369,751) 6,421,520 (5,782,043) (89,306) 550,171


Grossamounts ofrecognizedfinancialliabilities

Gross amountsof recognizedfinancial assetsoffset in thestatement offinancialposition

Net amounts offinancialliabilities

presented in thestatement offinancialposition


position


Cashcollateral

Derivatives held for trading 2,769,306 - 2,769,306 (1,803,390) (207,797) 758,119Derivatives held for hedging 63,880 - 63,880 (22,758) (11,922) 29,200Payable spot exchange 2,555,913 - 2,555,913 (2,555,485) - 428Repurchase 1 1,261,371 - 1,261,371 (1,261,371) - -Domestic exchangesettlement credits 20,655,921 (19,323,418) 1,332,503 (1,332,503) - -

Other financial instruments 928 (897) 31 (31) - -27,307,319 (19,324,315) 7,983,004 (6,975,538) (219,719) 787,747

1 Includes repurchase agreements sold to customers.

85


7. Due from Financial Institutions

Details of due from Financial Institutions as of September 30, 2017 and December 31, 2016, are asfollows:

(In millions of Korean won)Financial Institution

Interestrate(%)

September 30,2017

December 31,2016

Due from financialinstitutions inKorean won

Due from Bank ofKorea Bank of Korea 0.00 ~ 1.28 11,217,405 7,259,264

Due from bankinginstitutions

KEB Hana Bank andothers 0.00 ~ 2.07 69,565 3,750

Due from others KB Securities Co., Ltd.and others

0.00 ~ 1.00 1,906,156 2,104,822

13,193,126 9,367,836

Due from financialinstitutions inforeign currencies

Due from banks inforeign currencies

Bank of Korea and others - 1,401,462 2,025,373

Time deposits inforeign currencies

China Construction BankNY Branch and others 0.11 ~ 9.50 910,953 699,488

Due from othersSociete Generale andothers

- 380,698 33,998

2,693,113 2,758,85915,886,239 12,126,695

Restricted due from financial institutions as of September 30, 2017 and December 31, 2016, are asfollows:

(In millions of Korean won)Financial Institution

September 30,2017

December 31,2016 Reason for restriction

Due from financialinstitutions inKorean won

Due from Bank ofKorea

Bank of Korea 11,217,405 7,259,264 Bank of Korea Act

Due from others Morgan Stanley bankinternational Ltd.

1,020 678 Derivatives marginaccount

11,218,425 7,259,942

Due from financialinstitutions inforeign currencies

Due from banks inforeign currencies

Bank of Korea andothers

550,250 564,099 Bank of Korea Act andothers

Time deposits inforeign currencies

China Construction BankNY Branch and others 34,401 24,170

New York State BankingLaw

Due from others Societe Generale andothers

107,818 11,490 Derivatives marginaccount

692,469 599,75911,910,894 7,859,701

86


8. Assets Pledged as Collaterals

Details of assets pledged as collaterals as of September 30, 2017 and December 31, 2016, are asfollows:


Assets pledged PledgeeSeptember 30, 2017

Carrying amount Reason for the pledgeFinancial assetsheld for trading

Korea Exchange and others 103,866 Repurchase agreementsBank of Korea 452,281 Borrowings from Bank of KoreaKB Securities Co., Ltd. 8,575 Derivatives transactionsOthers 8,128 Others

572,850Available-for-salefinancial assets

MERITZ Securities Co., Ltd.and others

882,810 Repurchase agreements

Bank of Korea 604,708 Borrowings from Bank of KoreaBank of Korea 1,138,244 Settlement risk of Bank of KoreaDeutsche Bank. AG 232,980 Derivatives transactionsOthers 19,998 Others

2,878,740Held-to-maturityfinancial assets

Korea Securities Depositoryand others 35,028 Repurchase agreements

Bank of Korea 1,327,181 Borrowings from Bank of KoreaBank of Korea 1,116,054 Settlement risk of Bank of KoreaKB Securities Co., Ltd. andothers 236,733 Derivatives transactions

Others 133,457 Others2,848,453

Mortgage loans Others 5,229,489 Covered BondBuilding/ Land Samsung Life Insurance Co.,

Ltd. and others320,678 Others

11,850,210

87



Assets pledged PledgeeDecember 31, 2016

Carrying amount Reason for the pledgeFinancial assetsheld for trading

Korea Securities Depositoryand others


KB Securities Co., Ltd. andothers 3,020 Derivatives transactions

90,738Available-for-salefinancial assets

Korea Securities Depositoryand others 1,288,571 Repurchase agreements

Bank of Korea 490,297 Borrowings from Bank of KoreaBank of Korea 493,896 Settlement risk of Bank of KoreaKEB Hana Bank and others 960,868 Derivatives transactionsOthers 19,957 Others

3,253,589Held-to-maturityfinancial assets

Korea Securities Depositoryand others


Bank of Korea 1,251,011 Borrowings from Bank of KoreaBank of Korea 1,178,800 Settlement risk of Bank of KoreaKB Securities Co., Ltd. andothers

209,022 Derivatives transactions

Others 261,850 Others2,935,718

Mortgage loans Others 2,252,315 Covered BondBuilding/ Land Samsung Life Insurance Co.,

Ltd. and others332,148 Others

8,864,508

The fair value of collateral available to sell or repledge regardless of debtor's default as of September30, 2017 and December 31, 2016, is as follows:


Fair value of collateralFair value of collateralsold or repledged

Securities 2,262,801 -


Fair value of collateralFair value of collateralsold or repledged

Securities 2,955,306 -

88


9. Derivative Financial Instruments and Hedge Accounting

The Group engages in derivative trading activities to hedge the interest rate and foreign currency riskexposures that arise from the Group’s own assets and liabilities. In particular, the Group applies fairvalue hedge accounting using interest rate swaps and demand deposits in foreign currencies tohedge the risk of changes in fair values due to the changes in interest rates and foreign exchangerates of structured debentures in Korean won, debentures in foreign currencies, structured deposits inforeign currencies, debt securities in Korean won, debt securities in foreign currencies and beneficiarycertificates in foreign currencies. Also, the Group applies cash flow hedge accounting using interestrate swaps to hedge cash flow risk of floating rate notes in Korean won and borrowings in foreigncurrencies. In addition, the Group applies net investment hedge accounting by designatingdebentures in foreign currencies and currency forwards as hedging instruments to hedge foreignexchange risks on net investments in foreign operations.

Details of derivative financial instruments for trading as of September 30, 2017 and December 31,2016, are as follows:

(In millions of Korean won) September 30, 2017Notional amount Assets Liabilities

Interest rateFutures 1 1,333,676 - -Swaps 99,629,297 445,652 398,923Options 9,457,000 91,088 198,748

110,419,973 536,740 597,671CurrencyForwards 71,170,690 573,915 532,356Futures 1 529,225 - -Swaps 29,629,006 409,926 394,388Options 1,178,072 3,543 5,327

102,506,993 987,384 932,071Stock and indexFutures 1 28,494 - -Options 72,753 2,725 301

101,247 2,725 301Others 1,073,837 13,837 878

214,102,050 1,540,686 1,530,921

89


(In millions of Korean won) December 31, 2016Notional amount Assets Liabilities

Interest rateFutures 1 1,030,888 - -Swaps 86,741,333 638,420 552,695Options 5,202,000 38,216 150,753

92,974,221 676,636 703,448CurrencyForwards 56,486,111 1,302,620 1,152,025Futures 1 299,913 - -Swaps 28,107,538 752,636 909,277Options 487,313 4,947 4,557

85,380,875 2,060,203 2,065,859Stock and indexOptions 58,770 2,433 288

Others 942,416 6,707 123179,356,282 2,745,979 2,769,718

1 A gain or loss from daily mark-to-market futures is reflected in the margin accounts.

Fair value hedge

The fair value of derivative financial instruments designated as hedging instruments as of September30, 2017 and December 31, 2016, is as follows:


Interest rate-related swaps 3,035,117 46,655 47,613Other 100,000 1,824 99

3,135,117 48,479 47,712


Interest rate-related swaps 3,130,646 48,424 63,634Other 140,000 1,464 186

3,270,646 49,888 63,820

The fair value of non-derivative financial instruments designated as hedging instruments as ofSeptember 30, 2017 and December 31, 2016, is as follows:

(In millions of Korean won) September 30, 2017 December 31, 2016

Demand deposits in foreign currencies 34,187 -

90


Gains and losses from fair value hedging instruments and hedged items attributable to the hedgedrisk for the nine-month periods ended September 30, 2017 and 2016, are as follows:

(In millions of Korean won) September 30, 2017 September 30, 2016

Gains on hedging instruments 16,053 54,568Losses on the hedged item attributable to the hedged risk (17,540) (53,694)

(1,487) 874

Cash flow hedge

The fair value of derivative financial instruments designated as hedging instruments as of September30, 2017 and December 31, 2016, is as follows:


Interest rate-related swaps 1,777,385 2,500 36


Interest rate-related swaps 680,000 578 60

Gains and losses from cash flow hedging instruments and hedged items attributable to the hedgedrisk for the nine-month periods ended September 30, 2017 and 2016, are as follows:


Gains(losses) on hedging instruments 2,914 (190)Effective gains(losses) from cash flow hedging instruments 2,908 (231)Ineffective gains from cash flow hedging instruments 6 41

Amounts recognized in other comprehensive income and reclassified from equity to profit or loss forthe nine-month periods ended September 30, 2017 and 2016, are as follows:


Other comprehensive income(expense) 2,908 (231)Reclassification to loss (445) -Income tax effect (596) 56

1,867 (175)

As of September 30, 2017, the hedged items subject to cash flow hedge are exposed to the risk ofchanges in cash flows until June 9, 2022.

91


Hedges of a net investment in a foreign operation

Fair value of derivative financial instruments designated as hedging instruments as of September 30,2017 is as follows:


Currency forwards 293,555 - 963

There was no derivative financial instruments designated as hedging instruments as of December 31,2016.

Fair value of non-derivative financial instruments designated as hedging instruments is as follows:


Debentures in foreign currencies 107,413 199,478

Effective portion of gain or loss on hedging instruments recognized in other comprehensive incomefor the nine-month periods ended September 30, 2017 and 2016, are as follows:


Other comprehensive income 1,380 9,520Income tax effect (334) (2,304)Other comprehensive income after tax 1,046 7,216

There is no ineffective portion of gain or loss related to hedge on net investments in foreignoperations for the nine-month period ended September 30, 2017.

10. Loans

Loans as of September 30, 2017 and December 31, 2016, are as follows:


Loans 248,901,200 237,576,213Deferred loan origination fees and costs 558,546 570,450Allowances (1,464,345) (1,595,611)Carrying amount 247,995,401 236,551,052

Loans to banks as of September 30, 2017 and December 31, 2016, are as follows:


Loans 4,962,175 5,542,989Allowances (85) (66)Carrying amount 4,962,090 5,542,923

92


Loans to customers other than banks as of September 30, 2017 and December 31, 2016,consist of:


Loans in Korean won 127,229,891 104,387,249 231,617,140Loans in foreign currencies 95,489 3,164,945 3,260,434Domestic import usance bills - 2,381,979 2,381,979Off-shore funding loans - 678,256 678,256Call loans - 443,736 443,736Bills bought in Korean won - 5,016 5,016Bills bought in foreigncurrencies

- 3,617,670 3,617,670

Guarantee payments underpayment guarantee

- 9,895 9,895

Reverse repurchase agreements - 1,721,700 1,721,700Privately placed bonds - 761,745 761,745

127,325,380 117,172,191 244,497,571Proportion (%) 52.08 47.92 100.00Allowances (318,750) (1,145,510) (1,464,260)

127,006,630 116,026,681 243,033,311

(In millions of Korean won) December 31, 2016Retail Corporate Total

Loans in Korean won 123,804,999 97,471,594 221,276,593Loans in foreign currencies 72,329 2,685,932 2,758,261Domestic import usance bills - 2,962,676 2,962,676Off-shore funding loans - 559,915 559,915Call loans - 262,331 262,331Bills bought in Korean won - 5,568 5,568Bills bought in foreigncurrencies - 2,834,172 2,834,172

Guarantee payments underpayment guarantee - 11,327 11,327

Reverse repurchase agreements - 1,239,500 1,239,500Privately placed bonds - 693,331 693,331

123,877,328 108,726,346 232,603,674Proportion (%) 53.26 46.74 100.00Allowances (333,269) (1,262,276) (1,595,545)

123,544,059 107,464,070 231,008,129

93


Changes in deferred loan origination fees and costs for the nine-month periods ended September 30,2017 and 2016, are as follows:

(In millions of Korean won) September 30, 2017Beginning Increase Decrease Other Ending

Deferred loanorigination costsLoans in Korean won 582,479 201,152 (215,231) - 568,400Other origination costs 295 532 (257) - 570

582,774 201,684 (215,488) - 568,970Deferred loanorigination feesLoans in Korean won 9,968 1,115 (4,470) - 6,613Other origination fees 2,356 2,328 (869) (4) 3,811

12,324 3,443 (5,339) (4) 10,424570,450 198,241 (210,149) 4 558,546

(In millions of Korean won) September 30, 2016Beginning Increase Decrease Other Ending

Deferred loanorigination costsLoans in Korean won 594,518 221,089 (230,322) - 585,285Other origination costs 470 185 (314) - 341

594,988 221,274 (230,636) - 585,626Deferred loanorigination feesLoans in Korean won 15,972 1,943 (8,020) - 9,895Other origination fees 4,447 417 (2,119) (6) 2,739

20,419 2,360 (10,139) (6) 12,634574,569 218,914 (220,497) 6 572,992

94


11. Allowances for Loan Losses

Changes in the allowances for loan losses for the nine-month periods ended September 30, 2017 and2016, are as follows:


Beginning 333,269 1,262,342 1,595,611Written-off (207,018) (323,494) (530,512)Recoveries from written-offloans 108,554 176,832 285,386Sale (542) (11,670) (12,212)Other changes 1,188 (83,931) (82,743)Provision 1 83,299 125,516 208,815Ending 318,750 1,145,595 1,464,345


Beginning 432,414 1,593,465 2,025,879Written-off (181,981) (535,410) (717,391)Recoveries from written-offloans 116,152 83,033 199,185Sale (3,390) (28,664) (32,054)Other changes (4,519) (57,036) (61,555)Provision(Reversal) 1 (30,360) 351,536 321,176Ending 328,316 1,406,924 1,735,240

1 Provision(reversal) for credit losses in statements of comprehensive income also includesprovision(reversal) for unused commitments and guarantees (Note 22), provision(reversal) forfinancial guarantee contracts (Note 22), and provision(reversal) for other financial assets (Note 17).

95


12. Financial Assets at Fair Value Through Profit or Loss and Financial Investments

Details of financial assets at fair value through profit or loss and financial investments as ofSeptember 30, 2017 and December 31, 2016, are as follows:

(In millions of Korean won) September 30, 2017 December 31, 2016Financial assets held for tradingDebt securitiesGovernment and public bonds 2,079,838 2,149,866Financial bonds 3,820,836 3,658,448Corporate bonds 2,101,394 1,445,591Asset-backed securities 159,997 222,076Others 271,657 217,137

Equity securitiesStocks 125,814 34,131Beneficiary certificates 144,884 27,099

Others 72,230 72,3498,776,650 7,826,697

Financial assets designated at fair valuethrough profit or lossDerivative linked securities 130,185 129,535

Total financial assets at fair value throughprofit or loss 8,906,835 7,956,232

Available-for-sale financial assetsDebt securitiesGovernment and public bonds 3,074,187 6,590,766Financial bonds 13,637,698 8,370,202Corporate bonds 5,566,644 4,116,728Asset-backed securities 1,953,975 2,729,749

Equity securitiesStocks 1,924,464 1,776,142Equity investments 155,162 148,400Beneficiary certificates 3,163,958 3,572,421

Others 500 50029,476,588 27,304,908

Held-to-maturity financial assetsDebt securitiesGovernment and public bonds 1,314,525 1,534,324Financial bonds 2,029,168 1,528,268Corporate bonds 1,433,955 1,782,391Asset-backed securities 4,375,970 3,582,515

9,153,618 8,427,498Total financial investments 38,630,206 35,732,406

96


The impairment losses and the reversal of impairment losses in financial investment for the nine-month periods ended September 30, 2017 and 2016, are as follows:

(In millions of Korean won) September 30, 2017Impairment Reversal Net

Available-for-salefinancial assets (5,001) - (5,001)

(In millions of Korean won) September 30, 2016Impairment Reversal Net

Available-for-salefinancial assets (2,479) - (2,479)

13. Investments in Associates

Investments in associates as of September 30, 2017 and December 31, 2016, are as follows:

(In millions of Korean won) September 30, 2017Ownership

(%)Acquisition

costShare of netasset amount

Carryingamount Industry Location

Balhae Infrastructure Fund 1 12.61 101,794 103,479 103,479 Investment finance KoreaKorea Credit Bureau Co., Ltd. 1 9.00 4,500 5,133 5,133 Credit information KoreaKB12-1 Venture InvestmentPartnership 3

80.00 22,800 33,039 33,039 Investment finance Korea

KoFC KBIC Frontier Champ2010-5(PEF)


KB GwS Private SecuritiesInvestment Trust


Incheon Bridge Co., Ltd. 1 14.99 9,159 (15,655) - Operation of highwaysand related facilities

Korea

KoFC POSCO HANWHA KBShared Growth No.2. PrivateEquity Fund


Future Planning KB Start-upCreation Fund 3


Shinla Construction Co., Ltd. 4 20.17 - (551) - Specialty construction KoreaTerra Corporation 4 24.06 - 36 20 Manufacture of

fabricated andprocessed metalproducts

Korea

MJT&I Corp. 4 22.89 - (601) 127 Wholesale of othermerchandise

Korea

Jungdong Steel Co., Ltd. 4 42.65 - (433) - Wholesale of primarymetal

Korea

Doosung Metal Co., Ltd. 4 26.49 - (20) - Manufacture of metaldoor, windows, shutterand relevant products

Korea

Shinhwa Underwear Co., Ltd. 4 26.05 - (102) 138 Manufacture ofunderwear andsleepwear

Korea

DPAPS Co., Ltd. 4 38.62 - 155 - Wholesale of paper KoreaJaeyang Industry Co., Ltd. 4 20.86 - (522) - Manufacture of luggage

and other protectivecases

Korea

97


Keundae Printing Co., Ltd. 4 41.01 - (223) 127 Screen Printing KoreaJinseung tech Co., Ltd. 4 30.04 - (173) - Manufacture of other

general-purposemachinery n.e.c.

Korea

Dong Jo Co., Ltd. 4 29.29 - 691 - Wholesale of agriculturaland forestry machineryand equipment

Korea

Korea NM Tech Co., Ltd. 4 22.41 - 580 - Manufacture of motorvehicles, trailers andsemitrailers

Korea

Jungdo Co., Ltd. 4 25.34 - 1,652 - Office, commercial andinstitutional buildingconstruction

Korea

Dae-A Leisure Co., Ltd. 4 49.36 - 1,017 - Earth works Korea

Paroman Corporation Co., Ltd.4 42.93 - 243 - Wholesale of outerwearand shirts

Korea

Daesang Techlon Co., Ltd.4 47.73 - 96 - Manufacture of Plastic,Teflon etc.

Korea

KB High-tech CompanyInvestment Fund 3


Aju Good TechnologyVenture Fund


KB Star office private realestate Investment Trust No.1

21.05 20,000 20,358 20,358 Investment financeKorea

315,973 327,684 340,621

(In millions of Korean won) December 31, 2016Ownership

(%)Acquisition

costShare of netasset amount

Carryingamount Industry Location

Balhae Infrastructure Fund 1 12.61 130,189 133,200 133,200 Investment finance KoreaKorea Credit Bureau Co., Ltd. 1 9.00 4,500 4,853 4,853 Credit information KoreaJSC Bank CenterCreditOrdinary shares 2, 5 29.56 954,104 (32,191) - Banking KazakhstanPreferred shares 2, 5 93.15KB12-1 Venture InvestmentPartnership 3


KoFC KBIC Frontier Champ2010-5(PEF)


KB GwS Private SecuritiesInvestment Trust


Incheon Bridge Co., Ltd. 1 14.99 24,677 728 728 Operation of highwaysand related facilities

Korea

KoFC POSCO HANWHA KBShared Growth No.2. PrivateEquity Fund


Future Planning KB Start-upCreation Fund 3


Shinla Construction Co., Ltd. 4 20.17 - (543) - Specialty construction KoreaTerra Corporation 4 24.06 - 44 28 Manufacture of

fabricated andprocessed metalproducts

Korea

MJT&I Corp. 4 22.89 - (542) 232 Wholesale of othermerchandise

Korea

Jungdong Steel Co., Ltd. 4 42.65 - (420) - Wholesale of primarymetal

Korea

98


Doosung Metal Co., Ltd. 4 26.49 - (51) - Manufacture of metaldoor, windows, shutterand relevant products

Korea

Shinhwa Underwear Co., Ltd. 4 26.05 - (137) 103 Manufacture ofunderwear andsleepwear

Korea

DPAPS Co., Ltd. 4 38.62 - 151 - Wholesale of paper KoreaEJADE Co., Ltd. 4 25.67 - (520) - Wholesale of underwear KoreaJaeyang Industry Co., Ltd. 4 20.86 - (522) - Manufacture of luggage

and other protectivecases

Korea

Keundae Printing Co., Ltd. 4 41.01 - (351) - Screen Printing KoreaKB High-tech CompanyInvestment Fund 3


Aju Good TechnologyVenture Fund


KB Star office private realestate Investment Trust No.1


1,310,043 334,105 367,976

1 As of September 30, 2017 and December 31, 2016, the Group is represented in the governing bodies of itsassociates. Therefore, the Group has significant influence over the decision-making process relating to their financialand business policies.

2 The Group determined that ordinary shares and convertible preferred shares issued by JSC Bank CenterCredit are thesame in economic substance except for the voting rights, and therefore, the equity method of accounting is applied onthe basis of single ownership ratio of 41.93%, calculated based on ordinary and convertible preferred shares held bythe Group against the total outstanding ordinary and convertible preferred shares issued by JSC Bank CenterCredit.The fair value of ordinary shares of JSC Bank CenterCredit, reflecting the quoted market price as of December 31,2016, amounts to 29,358 million.

3 As of September 30, 2017 and December 31, 2016, the Group is a partner in a limited partnership and does not havethe right to control over these entities.

4 The investment in associates was reclassified from available-for-sale financial assets due to termination ofrehabilitation procedures.

5 The Group sold the entire share of JSC Bank CenterCredit for the nine-month period ended September 30, 2017.

Summarized financial information on the main associates, the carrying amount of the Group’s interestin the main associates and dividends received from the main associates are as follows:

(In millions of Korean won) September 30, 2017 1

Total assetsTotal

liabilitiesPaid-incapital Equity

Share ofnet assetamount

Unrealizedgain andloss andothers

Carryingamount

Balhae Infrastructure Fund 822,704 1,766 807,567 820,938 103,479 - 103,479Korea Credit Bureau Co., Ltd. 76,109 19,077 10,000 57,032 5,133 - 5,133KB12-1 Venture InvestmentPartnership 41,991 693 28,500 41,298 33,039 - 33,039KoFC KBIC Frontier Champ2010-5(PEF) 19,417 149 12,970 19,268 5,780 (367) 5,413

KB GwS Private SecuritiesInvestment Trust 496,387 497 425,814 495,890 103,791 (1,256) 102,535Incheon Bridge Co., Ltd. 652,547 756,986 61,096 (104,439) (15,655) 15,655 -KoFC POSCO HANWHA KBShared Growth No.2. PrivateEquity Fund 100,229 1,078 90,800 99,151 19,830 - 19,830Future Planning KB Start-upCreation Fund 37,490 1,535 29,400 35,955 17,977 - 17,977

99


KB High-tech CompanyInvestment Fund 51,450 250 50,000 51,200 25,600 - 25,600Aju Good Technology VentureFund 17,167 250 17,800 16,917 6,507 338 6,845KB Star office private real estateInvestment Trust No.1 217,580 120,876 95,000 96,704 20,358 - 20,358


Operatingrevenues

Profit(Loss)

Othercomprehensive

income

Totalcomprehensive

income Dividends

Balhae Infrastructure Fund 98,067 91,372 - 91,372 12,843Korea Credit Bureau Co., Ltd. 49,223 4,432 - 4,432 149KB12-1 Venture InvestmentPartnership 2,590 (1,818) 119 (1,699) -

KoFC KBIC Frontier Champ2010-5(PEF) 2,727 2,419 1,683 4,102 -

KB GwS Private SecuritiesInvestment Trust 26,252 25,500 - 25,500 5,753Incheon Bridge Co., Ltd. 69,709 (5,070) - (5,070) -KoFC POSCO HANWHA KBShared Growth No.2. PrivateEquity Fund 5,962 (861) 993 132 -Future Planning KB Start-upCreation Fund 478 (2,554) 106 (2,448) -KB High-tech CompanyInvestment Fund 2,800 885 35 920 -Aju Good Technology VentureFund 322 (751) - (751) -KB Star office private real estateInvestment Trust No.1 9,702 3,980 - 3,980 700

1 The amounts included in the financial information of the associates are adjusted to reflect adjustments made bythe Group, such as fair value adjustments made at the time of acquisition and adjustments for differences inaccounting policies.

(In millions of Korean won) December 31, 2016 1

Total assetsTotal

liabilitiesPaid-incapital Equity

Share ofnet assetamount

Unrealizedgain andloss andothers

Carryingamount

Balhae Infrastructure Fund 1,059,008 2,288 1,061,216 1,056,720 133,200 - 133,200Korea Credit Bureau Co., Ltd. 71,245 17,322 10,000 53,923 4,853 - 4,853JSC Bank CenterCredit 4,510,673 4,578,854 546,794 (68,181) (32,191) 32,191 -KB12-1 Venture InvestmentPartnership 49,545 1,048 34,000 48,497 38,797 - 38,797KoFC KBIC Frontier Champ2010-5(PEF) 50,213 2 47,970 50,211 15,063 (367) 14,696

KB GwS Private SecuritiesInvestment Trust 498,606 741 425,814 497,865 104,204 (1,256) 102,948Incheon Bridge Co., Ltd. 660,858 656,000 164,621 4,858 728 - 728KoFC POSCO HANWHA KBShared Growth No.2. PrivateEquity Fund 100,252 1,094 90,800 99,158 19,831 - 19,831

100


Future Planning KB Start-upCreation Fund 31,944 1,541 21,400 30,403 15,202 - 15,202KB High-tech CompanyInvestment Fund 30,535 256 30,000 30,279 15,140 - 15,140Aju Good Technology VentureFund 5,249 181 5,200 5,068 1,949 49 1,998KB Star office private real estateInvestment Trust No.1 216,988 120,943 95,000 96,045 20,220 - 20,220


Operatingrevenues

Profit(Loss)

Othercomprehensive

income

Totalcomprehensive

income Dividends

Balhae Infrastructure Fund 41,460 34,640 - 34,640 5,654Korea Credit Bureau Co., Ltd. 35,792 601 - 601 135JSC Bank CenterCredit 117,887 (37,437) 4,372 (33,065) -KB12-1 Venture InvestmentPartnership 5,671 1,311 (2,260) (949) -

KoFC KBIC Frontier Champ2010-5(PEF) 1,149 168 313 481 -KB GwS Private SecuritiesInvestment Trust 27,377 26,634 - 26,634 5,756Incheon Bridge Co., Ltd. 74,638 14,780 - 14,780 -KoFC POSCO HANWHA KBShared Growth No.2. PrivateEquity Fund 14,461 10,692 735 11,427 -

Future Planning KB Start-upCreation Fund 7,461 6,492 - 6,492 -KB High-tech CompanyInvestment Fund 596 (327) - (327) -KB Star office private real estateInvestment Trust No.1 12,676 5,658 - 5,658 848

1 The amounts included in the financial information of the associates are adjusted to reflect adjustments made bythe Group, such as fair value adjustments made at the time of acquisition and adjustments for differences inaccounting policies.

Changes in investments in associates for the nine-month periods ended September 30, 2017 and2016, are as follows:


BeginningAcquisitionand others

Disposaland others Dividends

Gain(loss)from usingequitymethod

Othercomprehen-sive income Ending

Balhae Infrastructure Fund 133,200 807 (29,202) (12,843) 11,517 - 103,479Korea Credit Bureau Co., Ltd. 4,853 - - (149) 429 - 5,133KB12-1 Venture InvestmentPartnership 38,797 - (4,400) - (1,454) 96 33,039

KoFC KBIC Frontier Champ2010-5(PEF) 14,696 - (10,500) - 712 505 5,413

KB GwS Private SecuritiesInvestment Trust 102,949 - - (5,753) 5,339 - 102,535

Incheon Bridge Co., Ltd. 728 - (728) - - - -

101


KoFC POSCO HANWHA KBShared Growth No.2.Private Equity Fund 19,831 - - - (200) 199 19,830

Future Planning KB Start-upCreation Fund 15,202 4,000 - - (1,277) 52 17,977

Terra Corporation 28 - - - (8) - 20MJT&I Corp. 232 - - - (105) - 127Shinhwa Underwear Co., Ltd. 103 - - - 35 - 138Keundae Printing Co., Ltd. - - - - 127 - 127KB High-tech CompanyInvestment Fund 15,140 10,000 - - 443 17 25,600

Aju Good TechnologyVenture Fund 1,997 4,848 - - - - 6,845

KB Star office private realestate Investment TrustNo.1 20,220 - - (700) 838 - 20,358

367,976 19,655 (44,830) (19,445) 16,396 869 340,621


BeginningAcquisitionand others

Disposaland others Dividends

Gain(loss)from usingequitymethod

Othercomprehen-sive income Ending

Balhae Infrastructure Fund 128,275 4,727 - (5,654) 4,366 - 131,714Korea Credit Bureau Co., Ltd. 4,580 - - (135) 146 - 4,591UAMCO Ltd. 129,707 - (101,740) (26,961) (1,006) - -KB12-1 Venture InvestmentPartnership 50,670 - (12,800) - 1,049 (1,808) 37,111

KoFC KBIC Frontier Champ2010-5(PEF) 15,169 - (540) - (1) 94 14,722

United PF 1st RecoveryPrivate Equity Fund 183,117 - (190,863) - 7,746 - -

KB GwS Private SecuritiesInvestment Trust 101,274 - - (5,756) 5,573 - 101,091

Incheon Bridge Co., Ltd. - - - - 328 - 328KoFC Posco Hanhwa KBshared growth PrivateEquity Fund 24,760 3,000 (3,280) - 90 692 25,262

Future Planning KB Start-upCreation Fund 12,000 - (2,500) - 3,054 - 12,554

Terra Corporation 21 - - - 7 - 28MJT&I Corp. 149 - - - 46 - 195Jungdong Steel Co., Ltd. 33 - - - (33) - -Doosung Metal Co., Ltd - - - - - - -Shinhwa Underwear Co., Ltd. 56 - - - 47 - 103KB High-tech CompanyInvestment Fund - 10,000 - - - - 10,000

KB Star office private realestate Investment TrustNo.1 20,328 - - (848) 1,191 - 20,671

670,139 17,727 (311,723) (39,354) 22,603 (1,022) 358,370

102


The tables below provide unrecognized share of losses of associates, both for the reporting periodand cumulatively, because the Group has stopped recognizing its share of losses of associates whenapplying the equity method.


Unrecognizedloss(gain)

Accumulatedunrecognized

lossUnrecognizedloss(gain)

Accumulatedunrecognized

lossIncheon Bridge Co., Ltd. 15,655 15,655 (1,879) -Shinla Construction Co., Ltd. 7 183 27 175Doosung Metal Co., Ltd (31) 23 8 57Myeongwon Tech Co., Ltd - - 20 63Jungdong Steel Co., Ltd 13 487 474 474DPAPS Co., Ltd. (4) 184 188 188EJADE Co., Ltd. (1,112) - 1,112 1,112JSC Bank CenterCredit (108,761) - 17,169 120,622

14. Property and Equipment, and Investment Properties

Details of property and equipment as of September 30, 2017 and December 31, 2016, are as follows:


Acquisitioncost

Accumulateddepreciation

Accumulatedimpairmentlosses

Carryingamount

Land 1,964,438 - (1,018) 1,963,420Buildings 1,212,689 (409,152) (5,859) 797,678Leasehold improvements 691,717 (617,435) - 74,282Equipment and vehicles 1,195,559 (1,072,305) - 123,254Construction in-progress 7,232 - - 7,232Finance lease assets 22,391 (16,959) - 5,432

5,094,026 (2,115,851) (6,877) 2,971,298


Acquisitioncost

Accumulateddepreciation

Accumulatedimpairmentlosses

Carryingamount

Land 2,060,974 - (1,018) 2,059,956Buildings 1,235,214 (403,397) (5,859) 825,958Leasehold improvements 653,804 (590,148) - 63,656Equipment and vehicles 1,195,582 (1,039,735) - 155,847Construction in-progress 4,013 - - 4,013Finance lease assets 22,391 (14,430) - 7,961

5,171,978 (2,047,710) (6,877) 3,117,391

103


Changes in property and equipment for the nine-month periods ended September 30, 2017 and 2016,are as follows:


Beginning Acquisition Transfers 1 Disposal Depreciation Others EndingLand 2,059,956 16,359 (112,879) (10) - (6) 1,963,420Buildings 825,958 - (5,930) (152) (22,186) (12) 797,678Leaseholdimprovements 63,656 265 42,191 (518) (33,525) 2,213 74,282Equipmentand vehicles 155,847 34,824 - (117) (67,233) (67) 123,254Constructionin-progress 4,013 78,534 (75,315) - - - 7,232Financelease assets 7,961 - - - (2,529) - 5,432

3,117,391 129,982 (151,933) (797) (125,473) 2,128 2,971,298


Beginning Acquisition Transfers 1 Disposal Depreciation Others EndingLand 1,882,298 - 20,227 (117) - 34 1,902,442Buildings 815,972 - 21,280 (394) (21,453) 98 815,503Leaseholdimprovements 48,365 946 36,328 (597) (26,580) 2,764 61,226Equipmentand vehicles 149,711 47,035 - (126) (66,640) (143) 129,837Constructionin-progress 443 114,077 (50,108) - - 3 64,415Financelease assets 12,583 - - - (3,900) - 8,683

2,909,372 162,058 27,727 (1,234) (118,573) 2,756 2,982,106

1 Including transfers from investment properties and assets held for sale.

Changes in accumulated impairment losses of property and equipment for the nine-month periodsended September 30, 2017 and 2016, are as follows:


Beginning Impairment Reversal Others Ending(6,877) - - - (6,877)


Beginning Impairment Reversal Others Ending(6,877) - - - (6,877)

104


Details of investment properties as of September 30, 2017 and December 31, 2016, are as follows:


Acquisition costAccumulateddepreciation Carrying amount

Land 214,537 - 214,537Buildings 154,064 (20,567) 133,497

368,601 (20,567) 348,034


Acquisition costAccumulateddepreciation Carrying amount

Land 230,254 - 230,254Buildings 160,793 (18,167) 142,626

391,047 (18,167) 372,880

As of September 30, 2017 and December 31, 2016, fair values of the investment properties amountto 378,952 million and 399,008 million, respectively. The investment properties were measuredby qualified independent appraisers with experience in valuing similar properties in the same area. Inaddition, per the fair value hierarchy on Note 6.1, the fair value hierarchy of all investment propertieshas been categorized and classified as Level 3.

Rental income from the above investment properties for the nine-month periods ended September 30,2017 and 2016, amounts to 14,427 million and 16,654 million, respectively.

Changes in investment properties for the nine-month periods ended September 30, 2017 and 2016,are as follows:

(In millions of Korean won) September 30, 2017Beginning Acquisitions Transfers Depreciation Ending

Land 230,254 - (15,717) - 214,537Buildings 142,626 256 (5,525) (3,860) 133,497

372,880 256 (21,242) (3,860) 348,034

(In millions of Korean won) September 30, 2016Beginning Acquisitions Transfers Depreciation Ending

Land 255,806 - (26,755) - 229,051Buildings 157,373 1,085 (12,935) (2,603) 142,920

413,179 1,085 (39,690) (2,603) 371,971

105


15. Intangible Assets

Details of intangible assets as of September 30, 2017 and December 31, 2016, are as follows:

(In millions of Korean won) September 30, 2017Acquisition

costAccumulatedamortization

Accumulatedimpairment losses

Carryingamount

Goodwill 66,490 - - 66,490Other intangible assets 859,356 (711,982) (3,633) 143,741

925,846 (711,982) (3,633) 210,231

(In millions of Korean won) December 31, 2016Acquisition



Carryingamount

Goodwill 66,490 - - 66,490Other intangible assets 828,618 (680,215) (4,179) 144,224

895,108 (680,215) (4,179) 210,714

Details of goodwill as of September 30, 2017 and December 31, 2016, are as follows:

(In millions of Korean won) September 30, 2017 December 31, 2016Acquisition

costCarryingamount

Acquisitioncost

Carryingamount

Housing & Commercial Bank 65,288 65,288 65,288 65,288KB Cambodia Bank 1,202 1,202 1,202 1,202

66,490 66,490 66,490 66,490

There is no change in goodwill for the nine-month periods ended September 30, 2017 and 2016.

Details of allocating goodwill to cash-generating units and related information for impairment testingas of December 31, 2016, are as follows:

(In millions of Korean won) Housing & Commercial Bank

RetailBanking

CorporateBanking

KBCambodiaBank Total

Carrying amounts 49,315 15,973 1,202 66,490Recoverable amount exceededcarrying amount 11,517,237 2,726,509 63 14,243,809Discount rate (%) 12.70 12.91 28.64Permanent growth rate (%) 1.00 1.00 1.00

106


Goodwill is allocated to cash-generating units that are expected to benefit from the synergies of thecombination for impairment testing, and cash-generating units consist of an operating segment or unitswhich are not larger than an operating segment. The Group recognized the amount of 65,288 millionrelated to goodwill acquired in the merger of Housing & Commercial Bank. Of this amount, the amountsof 49,315 million and 15,973 million were allocated to the Retail Banking and Corporate Banking,respectively. Cash-generating units, to which goodwill has been allocated, is tested for impairmentannually and whenever there is an indication that the unit may be impaired, by comparing the carryingamount of the unit, including the goodwill, with the recoverable amount of the unit.

The recoverable amount of a cash-generating unit is measured at the higher of its fair value lesscosts to sell and its value in use. The fair value less costs to sell is the amount obtainable from thesale in an arm’s length transaction between knowledgeable, willing parties, less the costs of disposal.If it is difficult to measure the amount obtainable from the sale of the cash-generating unit, the Groupmeasures the fair value less costs to sell by reflecting the characteristics of the measured cash-generating unit. If it is not possible to obtain the reliable information to measure the fair value lesscosts to sell, the Group uses the asset’s value in use as its recoverable amount. Value in use is thepresent value of the future cash flows expected to be derived from an asset or cash-generating unit.The projections of the future cash flows are based on the most recent financial budget approved bymanagement and generally cover a period of five years. The future cash flows after projection periodare estimated on the assumption that the future cash flows will increase by 1.0% annually for RetailBanking, Corporate Banking and KB Cambodia Bank. The key assumptions used for the estimation ofthe future cash flows are the market size and the Group’s market share. The discount rate is a pre-taxrate that reflects assumptions regarding risk-free interest rate, market risk premium and the risksspecific to the asset for which the future cash flow estimates have not been adjusted.

Details of intangible assets, excluding goodwill, as of September 30, 2017 and December 31, 2016,are as follows:

(In millions of Korean won) September 30, 2017Acquisition



Carryingamount

Industrial property rights 1,617 (1,333) - 284Software 697,370 (616,200) - 81,170Other intangible assets 135,056 (82,047) (3,633) 49,376Finance leases assets 25,313 (12,402) - 12,911

859,356 (711,982) (3,633) 143,741

(In millions of Korean won) December 31, 2016Acquisition



Carryingamount

Industrial property rights 1,417 (1,281) - 136Software 675,830 (592,069) - 83,761Other intangible assets 126,058 (77,881) (4,179) 43,998Finance leases assets 25,313 (8,984) - 16,329

828,618 (680,215) (4,179) 144,224

107


Changes in intangible assets, excluding goodwill, for the nine-month periods ended September 30,2017 and 2016, are as follows:

(In millions of Korean won) September 30, 2017Beginning Acquisition Disposal Amortization Others Ending

Industrial property rights 136 229 (8) (72) (1) 284Software 83,761 21,137 - (24,229) 501 81,170Other intangible assets 43,998 10,878 (306) (4,636) (558) 49,376Finance leases assets 16,329 - - (3,418) - 12,911

144,224 32,244 (314) (32,355) (58) 143,741

(In millions of Korean won) September 30, 2016Beginning Acquisition Disposal Amortization Others Ending

Industrial property rights 215 25 - (93) (3) 144Software 44,984 38,069 - (19,279) (31) 63,743

Other intangible assets 49,910 6,474 (3,110) (6,267) (274) 46,733

Finance leases assets 20,000 - - (3,272) - 16,728

115,109 44,568 (3,110) (28,911) (308) 127,348

Changes in accumulated impairment losses on intangible assets for the nine-month periods endedSeptember 30, 2017 and 2016, are as follows:

(In millions of Korean won) September 30, 2017Beginning Impairment Reversal Others Ending

Accumulated impairmentlosses on other intangibleassets (4,179) - - 546 (3,633)

(In millions of Korean won) September 30, 2016Beginning Impairment Reversal Others Ending

Accumulated impairmentlosses on other intangibleassets (7,470) - - 5,201 (2,269)

Changes in emission rights for the nine-month period ended September 30, 2017, are as follows:

(KAU, in millions of Korean won)Applicableunder 2016

Applicableunder 2017 Total

QuantityCarryingamount Quantity

Carryingamount Quantity

Carryingamount

Beginning 99,283 - 104,920 - 204,203 -Gratuitous allocation 578 - 17,046 - 17,624 -Borrowing 18,306 - (18,306) - - -Surrendered to government (117,484) - - - (117,484) -Cancel (683) - (398) - (1,081) -Ending - - 103,262 - 103,262 -

108


16. Deferred Income Tax Assets and Liabilities

Details of deferred income tax assets and liabilities as of September 30, 2017 and December 31,2016, are as follows:

(In millions of Korean won) September 30, 2017Assets Liabilities Net amount

Other provisions 72,975 - 72,975Impairment losses on property and equipment 7,718 - 7,718Interest on equity index-linked deposits 41 - 41Share-based payments 12,305 - 12,305Provisions for guarantees 22,507 - 22,507Gains on valuation of derivatives - (26,617) (26,617)Present value discount - (60) (60)Losses on fair value hedged item - (10,586) (10,586)Accrued interest - (31,561) (31,561)Deferred loan origination fees and costs - (117,804) (117,804)Gains on revaluation - (270,598) (270,598)Investments in subsidiaries and associates 10,923 (82,331) (71,408)Gains on valuation of security investment 47,521 - 47,521Defined benefit liabilities 281,779 - 281,779Accrued expenses 57,178 - 57,178Retirement insurance expense - (247,858) (247,858)Adjustments to the prepaid contributions - (14,845) (14,845)Others 142,146 (17,826) 124,320

655,093 (820,086) (164,993)Offsetting of deferred income tax assets andliabilities (652,891) 652,891 -

2,202 (167,195) (164,993)

109


(In millions of Korean won) December 31, 2016Assets Liabilities Net amount

Other provisions 70,507 - 70,507Impairment losses on property and equipment 5,037 - 5,037Interest on equity index-linked deposits 41 - 41Share-based payments 10,408 - 10,408Provisions for guarantees 30,569 - 30,569Gains on valuation of derivatives - (10,235) (10,235)Present value discount - (22) (22)Losses on fair value hedged - (14,335) (14,335)Accrued interest - (43,842) (43,842)Deferred loan origination fees and costs - (120,310) (120,310)Gains on revaluation - (270,890) (270,890)Investments in subsidiaries and associates 6,672 (89,282) (82,610)Gains on valuation of security investment 68,455 - 68,455Defined benefit liabilities 300,059 - 300,059Accrued expenses 232,207 - 232,207Retirement insurance expense - (270,808) (270,808)Adjustments to the prepaid contributions - (15,142) (15,142)Others 179,048 (20,464) 158,584

903,003 (855,330) 47,673Offsetting of deferred income tax assets andliabilities (855,311) 855,311 -

47,692 (19) 47,673

Unrecognized deferred income tax liabilities

No deferred income tax liabilities have been recognized for the taxable temporary difference of11,705 million associated with investments in subsidiaries and associates as of September 30,

2017, due to the following reasons:

- The Group is able to control the timing of the reversal of the temporary difference.- It is probable that the temporary difference will not be reversed in the foreseeable future.

No deferred income tax liabilities have been recognized for the taxable temporary difference of65,288 million arising from the initial recognition of goodwill from the merger of Housing and

Commercial Bank as of September 30, 2017.

Unrecognized deferred income tax assets

No deferred income tax assets have been recognized for the deductible temporary difference of680 million associated with investments in subsidiaries and associates as of September 30, 2017,

because it is not probable that the temporary differences will be reversed in the foreseeable future.

No deferred income tax assets have been recognized for deductible temporary differences of80,204 million and 11,159 million associated with loss on SPE repurchase and others,

respectively, as of September 30, 2017, due to the uncertainty that these will be realized in the future.

110


Changes in cumulative temporary differences for the nine-month periods ended September 30, 2017and 2016, are as follows:

(In millions of Korean won) September 30, 2017Beginning Decrease Increase Ending

Deductible temporary differencesOther provisions 291,350 291,350 301,548 301,548Impairment losses on propertyand equipment 20,812 20,812 31,892 31,892Interest on equity index-linkeddeposits 168 168 171 171

Share-based payments 43,008 43,008 50,848 50,848Provisions for guarantees 126,319 126,319 93,004 93,004Loss on SPE repurchase 80,204 - - 80,204Investment in subsidiaries andassociates 814,685 801,121 32,248 45,812Gains on valuation of securityinvestment 282,872 282,872 196,366 196,366Defined benefit liabilities 1,239,914 204,387 128,849 1,164,376Accrued expenses 959,532 959,532 236,272 236,272Others 759,606 228,591 67,516 598,531

4,618,470 2,958,160 1,138,714 2,799,024Unrecognized deferred incometax assetsLoss on SPE repurchase 80,204 80,204Investment in subsidiaries andassociates 788,196 680Others 21,797 11,159

3,728,273 2,706,981Tax rate (%) 24.20 24.20Total deferred income tax assetsfrom deductible temporarydifferences 903,003 655,093

111



Taxable temporary differencesLosses from fair value hedge (59,235) (59,235) (43,746) (43,746)Accrued interest (181,166) (135,530) (84,779) (130,415)Deferred loan origination feesand costs (497,149) (497,149) (486,792) (486,792)Gains on valuation of derivatives (42,294) (42,294) (109,986) (109,986)Present value discount (92) (92) (247) (247)Goodwill from merger (65,288) - - (65,288)Gains on revaluation (1,119,379) (1,205) - (1,118,174)Investment in subsidiaries andassociates (387,268) (59,729) (24,849) (352,388)Retirement insurance expense (1,119,042) (169,773) (74,939) (1,024,208)Adjustments to the prepaidcontributions (62,569) (61,034) (59,808) (61,343)Others (84,575) (28,379) (17,488) (73,684)

(3,618,057) (1,054,420) (902,634) (3,466,271)Unrecognized deferred incometax liabilitiesGoodwill from merger (65,288) (65,288)Investments in subsidiaries andassociates (17,205) (11,705)

(3,535,564) (3,389,278)Tax rate (%) 24.20 24.20Total deferred income taxliabilities from taxabletemporary differences (855,330) (820,086)

112



Deductible temporary differencesLosses from fair value hedge 11,882 11,882 38,085 38,085Other provisions 283,672 283,672 288,567 288,567Impairment losses on propertyand equipment 20,738 20,738 22,662 22,662Interest on equity index-linkeddeposits 287 287 159 159Share-based payments 33,754 33,754 34,862 34,862Provisions for guarantees 157,954 157,954 125,888 125,888Loss on SPE repurchase 80,204 - - 80,204Investment in subsidiaries andassociates 811,394 328 27,296 838,362Gains on valuation of securityinvestment 284,965 284,965 45,922 45,922Defined benefit liabilities 1,118,809 35,028 142,104 1,225,885Accrued expenses 190,228 190,228 155,563 155,563Others 659,343 61,702 185,400 783,041

3,653,230 1,080,538 1,066,508 3,639,200Unrecognized deferred incometax assetsOther provisions 67 -Loss on SPE repurchase 80,204 80,204Investment in subsidiaries andassociates 788,196 808,027Others 21,393 25,151

2,763,370 2,725,818Tax rate (%) 24.20 24.20Total deferred income taxassets from deductibletemporary differences 668,732 659,937

113



Taxable temporary differencesAccrued interest (179,394) (127,344) (101,347) (153,397)Deferred loan origination feesand costs (497,418) (497,418) (499,187) (499,187)Gains on valuation of derivatives (125,582) (125,582) (69,046) (69,046)Present value discount (104) (104) (36) (36)Goodwill from merger (65,288) - - (65,288)Gains on revaluation (1,126,842) (4,190) - (1,122,652)Investment in subsidiaries andassociates (407,434) (76,058) (25,786) (357,162)Retirement insurance expense (973,303) (35,028) (117,256) (1,055,531)Adjustments to the prepaidcontributions (90,653) (90,653) (69,224) (69,224)Others (77,537) (19,667) (15,074) (72,944)

(3,543,555) (976,044) (896,956) (3,464,467)Unrecognized deferred incometax liabilitiesGoodwill from merger (65,288) (65,288)Investments in subsidiaries andassociates (65,873) (48,593)

(3,412,394) (3,350,586)Tax rate (%) 24.20 24.20Total deferred income taxliabilities from taxabletemporary differences (825,684) (810,726)

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17. Other Assets

Details of other assets as of September 30, 2017 and December 31, 2016, are as follows:

(In millions of Korean won) September 30, 2017 December 31, 2016Other financial assetsOther receivables 4,043,959 2,660,373Accrued income 808,889 760,933Guarantee deposits 1,050,022 1,120,685Domestic exchange settlement debits 611,041 531,193Others 41,860 9,584Allowances for credit losses (51,246) (60,062)Present value discount (1,459) (1,506)

6,503,066 5,021,200Other non-financial assetsOther receivables 71 39Prepaid expenses 136,790 112,993Guarantee deposits 3,169 3,284Others 64,673 79,061Allowances for credit losses (24,265) (23,305)

180,438 172,0726,683,504 5,193,272

Changes in allowances for credit losses on other assets for the nine-month periods ended September30, 2017 and 2016, are as follows:

(In millions of Korean won) September 30, 2017Other financial

assetsOther non-

financial assets TotalBeginning 60,062 23,305 83,367Provision 2,383 1,089 3,472Written-off (12,096) (129) (12,225)Others 897 - 897Ending 51,246 24,265 75,511

(In millions of Korean won) September 30, 2016Other financial

assetsOther non-

financial assets TotalBeginning 286,915 23,128 310,043Provision 1,961 613 2,574Written-off (269,484) (536) (270,020)Others 32,581 - 32,581Ending 51,973 23,205 75,178

115


18. Assets Held for Sale

Details of assets held for sale as of September 30, 2017 and December 31, 2016, are as follows:


Acquisition cost 1Accumulated

impairment lossesCarryingamount

Fair value lesscosts to sell

Land 156,923 (5,937) 150,986 199,373Buildings 41,952 (19,078) 22,874 23,257

198,875 (25,015) 173,860 222,630


Acquisition cost 1Accumulated

impairment lossesCarryingamount

Fair value lesscosts to sell

Land 27,787 (8,177) 19,610 21,182Buildings 12,675 (5,758) 6,917 7,201

40,462 (13,935) 26,527 28,383

1 Acquisition cost of buildings held for sale is net of accumulated depreciation before classified asassets held for sale.

Changes in accumulated impairment losses of assets held for sale for the nine-month periods endedSeptember 30, 2017 and 2016, are as follows:


Beginning Provision Reversal Others Ending(13,935) (16,264) - 5,184 (25,015)


Beginning Provision Reversal Others Ending(13,861) (4,417) 96 2,397 (15,785)

As of September 30, 2017, assets held for sale consist of 13 real estates of closed offices, which themanagement of the Group was committed to sell, but not yet sold. Four out of the above assets heldfor sale are under negotiation and the remaining 9 assets are also being actively marketed.

116


19. Deposits

Details of deposits as of September 30, 2017 and December 31, 2016, are as follows:

(In millions of Korean won) September 30, 2017 December 31, 2016Demand depositsDemand deposits in Korean won 111,022,238 103,123,086Demand deposits in foreign currencies 5,302,207 5,009,480

116,324,445 108,132,566Time depositsTime deposits in Korean won 124,423,198 120,469,784Demand deposits in foreign currenciesTime deposits in foreign currencies 4,500,717 4,314,783Fair value adjustments on fair value hedgedtime deposits in foreign currencies (49,332) (61,656)

4,451,385 4,253,127128,874,583 124,722,911

Certificates of deposits 3,501,675 2,880,557Total deposits 248,700,703 235,736,034

20. Debts

Details of debts as of September 30, 2017 and December 31, 2016, are as follows:

(In millions of Korean won) September 30, 2017 December 31, 2016Borrowings 13,855,548 11,952,068Bonds sold under repurchase agreementsand others 1,214,486 1,271,908Call money 2,706,458 2,710,433

17,776,492 15,934,409

117


Details of borrowings as of September 30, 2017 and December 31, 2016, are as follows:


Lenders

Annualinterest rate

(%)September 30,

2017December 31,

2016Borrowingsin Koreanwon

Borrowings from theBank of Korea

Bank of Korea 0.50 ~ 0.75 1,892,727 1,644,260

Borrowings from thegovernment

Korea Energy Agencyand others

0.00 ~ 3.00 1,713,079 1,331,688

Borrowings frombanking institutions

Korea DevelopmentBank 0.20 ~ 2.70 341,417 320,755

Other borrowings Korea DevelopmentBank and others

0.00 ~ 3.90 3,220,905 2,636,273

7,168,128 5,932,976Borrowingsin foreigncurrencies

Due to banks Bank of America, N.A.and others

- 29,163 70,624

Borrowings frombanking institutions

Commerzbank andothers

0.00 ~ 4.60 5,150,061 3,949,377

Borrowings fromother financialinstitutions

Export Import Bank ofKorea and others

1.54 ~ 2.58 88,150 121,104

Other borrowings inforeign currencies

Standard CharteredBank and others

- 1,420,046 1,877,987

6,687,420 6,019,09213,855,548 11,952,068

Details of bonds sold under repurchase agreements and others as of September 30, 2017 andDecember 31, 2016, are as follows:


Lenders

Annualinterest rate

(%)September 30,

2017December 31,

2016Bonds sold underrepurchase agreements

Individuals, groups,corporations 0.87 ~ 1.42 1,205,105 1,261,371

Bills sold Counter sale 0.40 ~ 0.70 9,381 10,5371,214,486 1,271,908

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Details of call money as of September 30, 2017 and December 31, 2016, are as follows:


Lenders

Annualinterest rate

(%)September 30,

2017December 31,

2016Call money inKorean won

Deutsche BankAG,SEOUL and others 1.21 ~ 1.23 752,000 1,525,500

Call money inforeign currencies

Central Bank ofUzbekistan and others 0.70 ~ 1.55 1,954,458 1,184,933

2,706,458 2,710,433

21. Debentures

Details of debentures as of September 30, 2017 and December 31, 2016, are as follows:

(In millions of Korean won) Annualinterest rate

(%)September 30,

2017December 31,

2016Debentures in Korean wonStructured debentures 0.29 ~ 6.00 215,950 337,500Subordinated fixed rate debentures inKorean won 3.08 ~ 5.12 2,890,124 3,196,993

Fixed rate debentures in Korean won 1.29 ~ 3.45 12,273,665 7,259,095Floating rate debentures in Korean won - - 680,000

15,379,739 11,473,588Fair value adjustments on fair valuehedged debentures in Korean won 23,126 26,724Discount on debentures in Korean won (24,460) (9,560)

15,378,405 11,490,752Debentures in foreign currenciesFloating rate debentures 1.74 ~ 2.27 848,557 700,930Fixed rate debentures 1.38 ~ 2.88 2,316,334 2,803,721

3,164,891 3,504,651Fair value adjustments on fair valuehedged debentures in foreign currencies (17,539) (24,303)Discount on debentures in foreigncurrencies (14,036) (11,408)

3,133,316 3,468,94018,511,721 14,959,692

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Changes in debentures based on face value for the nine-month periods ended September 30, 2017and 2016, are as follows:

(In millions of Korean won) September 30, 2017Beginning Issues Repayments Others Ending

Debentures in Korean wonStructured debentures 337,500 - (121,550) - 215,950Subordinated fixed ratedebentures 3,196,993 - (306,869) - 2,890,124Fixed rate debentures 7,259,095 9,395,400 (4,380,830) - 12,273,665Floating rate debentures 680,000 - (680,000) - -

11,473,588 9,395,400 (5,489,249) - 15,379,739Debentures in foreigncurrenciesFloating rate debentures 700,930 840,581 (670,236) (22,718) 848,557Fixed rate debentures 2,803,721 568,150 (922,900) (132,637) 2,316,334

3,504,651 1,408,731 (1,593,136) (155,355) 3,164,89114,978,239 10,804,131 (7,082,385) (155,355) 18,544,630

((In millions of Korean won) September 30, 2016Beginning Issues Repayments Others Ending

Debentures in Korean wonStructured debentures 909,788 - (572,028) - 337,760Subordinated fixed ratedebentures 4,471,829 - (769,929) - 3,701,900Fixed rate debentures 6,750,523 2,504,000 (1,900,409) - 7,354,114Floating rate debentures - 680,000 - - 680,000

12,132,140 3,184,000 (3,242,366) - 12,073,774Debentures in foreigncurrenciesFloating rate debentures 1,477,524 32,889 (233,673) (92,736) 1,184,004Fixed rate debentures 2,325,537 1,096,300 (481,534) (144,738) 2,795,565

3,803,061 1,129,189 (715,207) (237,474) 3,979,56915,935,201 4,313,189 (3,957,573) (237,474) 16,053,343

22. Provisions

Details of provisions as of September 30, 2017 and December 31, 2016, are as follows:

(In millions of Korean won) September 30, 2017 December 31, 2016Provisions for unused loan commitments 114,395 124,991Provisions for acceptances and guarantees 93,026 126,428Provisions for asset retirement obligation 75,464 77,810Others 118,262 96,055

401,147 425,284

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Changes in provisions for unused loan commitments, acceptances and guarantees for the nine-monthperiods ended September 30, 2017 and 2016, are as follows:

(In millions of Korean won) September 30, 2017Provisions forunused loancommitments

Provisions foracceptances andguarantees Total

Beginning 124,991 126,428 251,419Effects of changes in foreignexchange rate (654) (1,737) (2,391)Reversal (9,942) (31,665) (41,607)Ending 114,395 93,026 207,421

(In millions of Korean won) September 30, 2016Provisions forunused loancommitments

Provisions foracceptances andguarantees Total

Beginning 126,282 158,454 284,736Effects of changes in foreignexchange rate (715) (1,392) (2,107)Provision(Reversal) 4,892 (31,094) (26,202)Ending 130,459 125,968 256,427

Changes in provisions for asset retirement obligation for the nine-month periods ended September30, 2017 and 2016, are as follows:

(In millions of Korean won) September 30, 2017 September 30, 2016Beginning 77,810 70,493Increase 2,259 2,839Used (5,921) (3,511)Unwinding of discount 1,316 1,224Ending 75,464 71,045

Provisions for asset retirement obligation are present value of estimated costs to be incurred forrestoration of the leased properties. Actual expenses are expected to be incurred at the end of eachlease contract. Three-year historical data of expired leases were used to estimate the average leaseyear. Also, the average restoration expense based on actual three-year historical data and the three-year historical average inflation rate were used to estimate the present value of estimated costs.

121


Changes in other provisions for the nine-month periods ended September 30, 2017 and 2016, are asfollows:


Membershiprewardsprogram

Dormantaccounts Litigations

Financialguaranteeliabilities

GreenhouseGas

Emissionliabilities 1 Others Total

Beginning 115 50,396 8,537 1,870 358 34,779 96,055Provision(Reversal) 120 24,673 343 (538) (165) 27,875 52,308Used andOthers (117) (27,193) (2,389) - - (402) (30,101)Ending 118 47,876 6,491 1,332 193 62,252 118,262

1 As of September 30, 2017, the estimated greenhouse gas emission is 86,424 tons.


Membershiprewardsprogram

Dormantaccounts Litigations

Financialguaranteeliabilities

GreenhouseGas

Emissionliabilities 1 Others Total

Beginning 99 41,091 11,570 3,809 69 38,531 95,169Provision(Reversal) 133 18,429 (1,824) (2,835) 431 3,133 17,467Used andOthers (124) (16,993) (1,577) - (145) (1,233) (20,072)Ending 108 42,527 8,169 974 355 40,431 92,564

1 As of September 30, 2016, the estimated greenhouse gas emission is 119,038 tons.

23. Net Defined Benefit Liabilities

Defined benefit plan

The Group operates defined benefit plans which have the following characteristics:

- The Group has the obligation to pay the agreed benefits to all its current and former employees.- Actuarial risk (that benefits will cost more than expected) and investment risk fall, in substance, onthe Group.

The net defined benefit liability recognized in the statements of financial position is calculated inaccordance with actuarial valuation methods. Data such as discount rates, future salary growth rates,and mortality rates based on market data and historical data are used. Actuarial assumptions maydiffer from actual results, due to changes in the market, economic trends and mortality trends.

122


Changes in the net defined benefit liabilities for the nine-month periods ended September 30, 2017 and2016, are as follows:

(In millions of Korean won) September 30, 2017Present value ofdefined benefitobligation

Fair value ofplan assets

Net definedbenefit liabilities

Beginning 1,380,236 (1,309,069) 71,167Current service cost 106,230 - 106,230Interest expense(income) 22,620 (21,270) 1,350Remeasurements : - - -- Return on plan assets (excluding amountsincluded in interest income) - 9,881 9,881

Payments from plans (benefit payments) (198,825) 198,825 -Payments from the Group (3,320) - (3,320)Transfer in 2,344 (2,343) 1Transfer out (5,562) 5,562 -Effects of changes in foreign exchange rate (93) - (93)Ending 1,303,630 (1,118,414) 185,216

(In millions of Korean won) September 30, 2016Present value ofdefined benefitobligation

Fair value ofplan assets

Net definedbenefit liabilities

Beginning 1,260,675 (1,205,006) 55,669Current service cost 119,280 - 119,280Interest expense(income) 23,329 (22,292) 1,037Remeasurements :- Return on plan assets (excludingamounts included in interest income) - 7,658 7,658

Contributions - (17) (17)Payments from plans (benefit payments) (44,594) 44,594 -Payments from the Group (3,995) - (3,995)Transfer in 2,249 (2,237) 12Transfer out (2,333) 2,333 -Effects of changes in foreign exchange rate 38 - 38Ending 1,354,649 (1,174,967) 179,682

Details of the net defined benefit liabilities as of September 30, 2017 and December 31, 2016, are asfollows:

(In millions of Korean won) September 30, 2017 December 31, 2016Present value of defined benefit obligation 1,303,630 1,380,236Fair value of plan assets (1,118,414) (1,309,069)Net defined benefit liabilities 185,216 71,167

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Details of post-employment benefits recognized in profit or loss as employee compensation andbenefits for the nine-month periods ended September 30, 2017 and 2016, are as follows:


2017September 30,

2016Current service cost 106,230 119,280Interest expenses of net defined benefit liabilities 1,350 1,037Total 107,580 120,317

Remeasurements of net defined benefit liabilities recognized as other comprehensive income for thenine-month periods ended September 30, 2017 and 2016, are as follows:


2017September 30,

2016Remeasurements:- Return on plan assets (excluding amountsincluded in interest income) (9,881) (7,658)

Income tax effects 2,391 1,853Remeasurements after income tax (7,490) (5,805)

Details of fair value of plan assets as of September 30, 2017 and December 31, 2016, are as follows:

(In millions of Korean won) September 30, 2017Assets quoted

in an active marketAssets not quotedin an active market Total

Time deposits - 1,118,414 1,118,414

(In millions of Korean won) December 31, 2016Assets quoted

in an active marketAssets not quotedin an active market Total

Time deposits - 1,309,069 1,309,069

Key actuarial assumptions used as of September 30, 2017 and December 31, 2016, are as follows:

Ratio (%)September 30, 2017 December 31, 2016

Discount rate 2.50 2.50Salary growth rate 2.00 3.75Turnover 1.00 1.00

Mortality assumptions are based on the 8th experience-based mortality table of Korea InsuranceDevelopment Institute of 2015.

124


The sensitivity of the defined benefit obligation to changes in the principal assumptions as of September30, 2017, is as follows:

Effect on defined benefit obligationChanges in principal

assumptionIncrease in principal

assumptionDecrease in principal

assumptionDiscount rate 0.5% p 3.92% decrease 4.19% increaseSalary growth rate 0.5% p 3.85% increase 3.63% decreaseTurnover 0.5% p 0.31% decrease 0.33% increase

The above sensitivity analyses are based on a change in an assumption while holding all otherassumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptionsmay be correlated. The sensitivity of the defined benefit obligation to significant actuarial assumptionsis calculated using the projected unit credit method which is used to calculate the defined benefitobligation.

Expected maturity analysis of undiscounted pension benefits as of September 30, 2017, is as follows:

(In millions of Korean won)Less than1 year

Between1 and 2 years



Over10 years Total

Pension benefits 93,792 102,961 408,039 776,657 2,115,661 3,497,110

The weighted average duration of the defined benefit obligations is 8.31 years.

125


24. Other Liabilities

Details of other liabilities as of September 30, 2017 and December 31, 2016, are as follows:

(In millions of Korean won) September 30, 2017 December 31, 2016Other financial liabilitiesOther payables 4,351,132 2,782,247Prepaid card and debit cards 2,241 1,929Accrued expenses 2,358,421 2,380,057Financial guarantee liabilities 24,341 22,377Deposits for letter of guarantees and others 177,876 189,286Domestic exchange settlement credits 36,302 1,332,503Foreign exchanges settlement credits 107,493 116,226Borrowings from other business accounts 6,195 5,204Payables to trust accounts 5,593,261 4,430,508Liabilities incurred from agency relationship 397,737 386,670Account for agency businesses 458,098 248,253Others 20,779 201,799

13,533,876 12,097,059Other non-financial liabilitiesOther payables 139,895 1,193,758Unearned revenue 53,089 35,733Accrued expenses 286,586 191,338Withholding taxes 54,568 103,849Others 87,502 80,833

621,640 1,605,51114,155,516 13,702,570

25. Equity

25.1 Capital Stock

Details of outstanding shares of the Group as of September 30, 2017 and December 31, 2016, are asfollows:

Ordinary sharesSeptember 30, 2017 December 31, 2016

Number of shares authorized 1,000,000,000 1,000,000,000Face value per share 5,000 5,000Number of shares 404,379,116 404,379,116Capital stock 1 2,021,896 2,021,896

1 In millions of Korean won.

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25.2 Capital Surplus

Details of capital surplus as of September 30, 2017 and December 31, 2016, are as follows:


Paid-in capital in excess of face value 4,604,417 4,604,417Gain on business combination 397,669 397,669Revaluation increment 177,229 177,229Other capital surplus 40,374 40,389

5,219,689 5,219,704

The gain on business combination is a gain from a bargain purchase related to the merger with KoreaLong Term Credit Bank on December 31, 1998, in accordance with previous Korean GAAP.

25.3 Accumulated Other Comprehensive Income

Details of accumulated other comprehensive income as of September 30, 2017 and December 31,2016, are as follows:

(In millions of Korean won) September 30, 2017 December 31, 2016Remeasurements of net defined benefitliabilities (101,569) (94,079)Currency translation differences 20,187 27,509Gains on valuation of available-for-salefinancial assets 850,388 680,965Share of other comprehensive income(loss)of associates 1,917 (87,577)Gains on cash flow hedging instruments 2,204 337Losses on hedging instruments ofa net investment in foreign operations (31,246) (32,292)

741,881 494,863

25.4 Retained Earnings

Retained earnings as of September 30, 2017 and December 31, 2016, consist of:


Legal reserves 2,033,716 2,033,471Regulatory reserve for credit losses 2,001,063 1,835,115Voluntary reserves 11,044,972 10,596,846Retained earnings before appropriation 1,990,558 1,123,107

17,070,309 15,588,539

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With respect to the allocation of net profit earned in a fiscal term, the Bank must set aside in its legalreserve an amount equal to at least 10% of its net income after tax as reported in the separatestatement of comprehensive income each time it pays dividends on its net profits earned until its legalreserve reaches at least the aggregate amount of its paid-in capital in accordance with Article 40 ofthe Banking Act. The reserves can only be transferred to capital stock or be used to reduce deficit.With respect to the Bank's branches overseas, a portion of the branch's net income is appropriatedinto legal reserves, in line with the financial legislation of the country where the overseas branch islocated.

Regulatory Reserve for Credit Losses

Measurement and Disclosure of Regulatory Reserve for Credit Losses are required in accordancewith Articles 29.1 through 29.2 of Regulation on Supervision of Banking Business.

Details of the regulatory reserve for credit losses as of September 30, 2017 and December 31, 2016,are as follows:

(In millions of Korean won) September 30, 2017 December 31, 2016Beginning 2,001,063 1,835,115Amounts estimated to be appropriated 141,477 165,948Ending 2,142,540 2,001,063

Adjustments to the regulatory reserve for credit losses for the three-month and nine-month periodsended September 30, 2017 and 2016, are as follows:

(In millions of Korean won) September 30, 2017 September 30, 2016Threemonths

Ninemonths

Threemonths

Ninemonths

Amounts estimated to beappropriated(reversed) 49,223 141,477 (53,584) 153,203Adjusted profit after provision ofregulatory reserve for credit losses 1 582,811 1,699,786 475,352 1,011,751

1 Adjusted profit after provision of regulatory reserve for credit losses is not accordance with KoreanIFRS and calculated on the assumption that provision of regulatory reserve for credit losses beforeincome tax is adjusted to the profit.

128


26. Interest Income and Expense

Details of interest income, expense, and net interest income for the three-month and nine-monthperiods ended September 30, 2017 and 2016, are as follows:


Ninemonths

Threemonths

Ninemonths

Interest incomeDue from financial institutions 19,751 50,957 15,831 56,385Loans 1,911,989 5,520,625 1,766,838 5,251,846Financial investmentsAvailable-for-sale financial assets 96,654 275,773 75,863 230,184Held-to-maturity financial assets 66,098 208,556 91,325 285,437Others 23,114 71,347 24,800 79,364

2,117,606 6,127,258 1,974,657 5,903,216Interest expensesDeposits 565,346 1,694,256 599,891 1,912,513Debts 58,162 158,285 41,778 121,425Debentures 93,508 263,387 97,102 304,574Others 13,160 38,823 12,007 35,072

730,176 2,154,751 750,778 2,373,584Net interest income 1,387,430 3,972,507 1,223,879 3,529,632

Interest income recognized on impaired loans is 23,647 million and 33,184 million for the nine-month periods ended September 30, 2017 and 2016, respectively.

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27. Net Fee and Commission Income

Details of fee and commission income, and fee and commission expense for the three-month andnine-month periods ended September 30, 2017 and 2016, are as follows:


Ninemonths

Threemonths

Ninemonths

Fee and commission incomeBanking activity fees 48,643 144,729 46,228 135,221Lending activity fees 20,206 56,403 21,117 58,669Agent activity fees 85,867 269,579 98,276 296,465Trust and other fiduciary fees 75,868 213,657 50,931 136,173Guarantee fees 7,096 21,989 7,881 22,898Credit card related fees andcommissions 259 969 409 1,033Foreign currency related fees 23,326 70,755 22,861 71,761Security activity commissions 45,973 126,656 41,033 121,130Other business account commission onconsignment 8,953 25,414 8,428 24,990Debit card related fees and commissions 162 486 153 486Others 55,133 160,053 36,932 110,546

371,486 1,090,690 334,249 979,372Fee and commission expenseTrading activity related fees 1 3,444 9,212 3,278 8,703Lending activity fees 6,656 21,340 6,309 16,593Credit card related fees andcommissions 392 1,143 258 1,157

Contributions to external institutions 6,303 18,689 5,457 16,256Outsourcing related fees 15,839 43,654 14,738 42,838Foreign currency related fees 5,176 13,622 2,946 9,794Management fees of written-off loans 2,229 7,638 2,222 8,525Others 22,317 65,400 18,589 56,173

62,356 180,698 53,797 160,039Net fee and commission income 309,130 909,992 280,452 819,333

1 Fees from financial assets/liabilities at fair value through profit or loss.

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28. Net Gains or Losses from Financial Assets/Liabilities at Fair Value Through Profit or Loss

28.1 Net gains or losses from financial instruments held for trading

Net gains or losses from financial instruments held for trading are composed of gains or losses fromfinancial instruments held for trading includes interest income, dividend income, gains or lossesarising from changes in the fair values, sales and redemptions.

Details for the three-month and nine-month periods ended September 30, 2017 and 2016, are asfollows:,


Ninemonths

Threemonths

Ninemonths

Gains from financial instrumentsheld for tradingFinancial assets held for tradingDebt securities 45,316 141,804 37,562 195,690Equity securities 8,803 19,119 1,347 4,265

54,119 160,923 38,909 199,955Derivatives held for tradingInterest rate 330,441 780,295 123,661 935,608Currency 509,246 3,470,548 1,929,123 3,363,963Stock or stock index - 3,840 134 532Other 441 1,614 149 770

840,128 4,256,297 2,053,067 4,300,873Financial liabilities held for trading - 78 91 236Other financial instruments - 22 15 188

894,247 4,417,320 2,092,082 4,501,252Losses from financial instrumentsheld for tradingFinancial assets held for tradingDebt securities 24,455 41,890 6,364 13,153Equity securities 977 4,225 - 2,142

25,432 46,115 6,364 15,295Derivatives held for tradingInterest rate 321,702 778,802 100,943 975,782Currency 502,185 3,479,745 2,024,232 3,490,491Stock or stock index 3,962 4,434 2,397 3,159Other 1,120 2,667 322 492

828,969 4,265,648 2,127,894 4,469,924Financial liabilities held for trading 17 125 594 2,400Other financial instruments 79 117 2 168

854,497 4,312,005 2,134,854 4,487,787Net gain or loss from financialinstruments held for trading 39,750 105,315 (42,772) 13,465

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28.2 Net gains or losses from financial instruments designated at fair value through profit orloss

Net gains or losses from financial instruments designated at fair value through profit or loss includesinterest income, dividend income, gains or losses arising from changes in the fair values, sales andredemptions. Details for the three-month and nine-month periods ended September 30, 2017 and2016, are as follows:


Ninemonths

Threemonths

Ninemonths

Gains from financial assets designated at fairvalue through profit or lossDerivative linked securities 1,047 5,228 3,222 5,496

Losses from financial assets designated at fairvalue through profit or lossDerivative linked securities - 557 (4,179) -

Net gain or loss from financial assets designatedat fair value through profit or loss 1,047 4,671 7,401 5,496

29. Other operating income and expenses

Details of other operating income and expenses for the three-month and nine-month periods endedSeptember 30, 2017 and 2016, are as follows:

(In millions of Korean won) September 30, 2017 September 30, 2016Three months Nine months Three months Nine months

Other operating incomeRevenue related to available-for-salefinancial assetsGains on sale of available-for-salefinancial assets 56,213 84,511 42,195 154,957

56,213 84,511 42,195 154,957Gains on foreign exchange transactions 501,096 1,292,452 823,915 2,885,528Dividend income 12,307 80,488 13,213 63,261Others 332 76,822 25,743 141,859

569,948 1,534,273 905,066 3,245,605Other operating expensesExpense related to available-for-salefinancial assetsLosses on sale of available-for-salefinancial assets 12,114 108,309 314 419Impairment on available-for-salefinancial assets 3,267 5,001 7 2,479

15,381 113,310 321 2,898Losses on foreign exchangetransactions 470,146 1,101,670 687,060 2,621,194

Others 172,008 602,917 209,301 666,210657,535 1,817,897 896,682 3,290,302

Net other operating expenses (87,587) (283,624) 8,384 (44,697)

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30. General and Administrative Expenses

30.1 General and Administrative Expenses

Details of general and administrative expenses for the three-month and nine-month periods endedSeptember 30, 2017 and 2016, are as follows:


Ninemonths

Threemonths

Ninemonths

Employee BenefitsSalaries and short-term employeebenefits - salaries 320,114 974,297 347,845 1,057,683Salaries and short-term employeebenefits - welfare expense 131,765 502,352 147,245 528,777Post-employment benefits - definedbenefit plans 35,853 107,580 40,105 120,317Post-employment benefits - definedcontribution plans 1,812 2,638 758 2,578Termination benefits (1,780) (3,595) (935) 55,272Share-based payments 3,553 22,432 7,381 11,418

491,317 1,605,704 542,399 1,776,045Depreciation and amortization 58,612 161,688 56,053 150,087Other general and administrativeexpensesRental expense 58,346 174,865 59,914 178,658Tax and dues 19,290 75,101 14,967 64,534Communication 5,627 15,811 5,288 16,359Electricity and utilities 6,466 16,905 6,557 17,578Publication 3,098 8,509 2,971 9,372Repairs and maintenance 3,213 8,195 3,032 8,629Vehicle 1,809 5,109 1,885 5,133Travel 1,247 3,161 781 2,593Training 3,551 11,364 3,380 11,382Service fees 23,266 65,605 22,144 64,165Others 95,303 264,155 84,853 245,328

221,216 648,780 205,772 623,731771,145 2,416,172 804,224 2,549,863

30.2 Share-based Payments

30.2.1 Share Grants

The Group changed the scheme of share-based payment from share option to share grants inNovember 2007. The share grant award program is an incentive plan that sets, on grant date, themaximum number of shares that can be awarded. Actual shares to be granted is determined inaccordance with achievement of performance targets over the vesting period.

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Details of the share grants as of September 30, 2017, are as follows:

(In number of shares)

Share grants Grant dateNumber of granted

shares 1 Vesting conditionsSeries 64 2015.07.24 11,133 Service period : 2 years 2,3Series 65 2015.08.26 11,587 Service period : 2 years 2,3Series 66 2014.11.21 28,392 Service period : 3 years 2,4Series 67 2016.01.01 135,934 Service period : 2 years 2,5Series 68 2016.07.05 9,621 Service period : 2 years 2,5Series 69 2017.01.01 330,194 Service period : 2 years 2,6Series 70 2017.07.24 8,743 Service period : 2 years 2,6

Series 71 2017.08.26 8,744 Service period : 2 years 2,6

Series 72 2017.08.28 5,601 Service period : 2 years 2,6

Deferred grant in 2014 - 35,312Deferred grant in 2015 - 61,328Deferred grant in 2016 - 155,407

801,996

1 Granted shares in relation to Series 64 ~ 72 represent the total number of shares granted todirectors and employees but not vested at the end of reporting period. The number of deferredgrants represents residual shares that have been vested at the end of reporting period.

2 Options are given to the executives and employees during the year for deferred paymentschedule(after the retirement date), payment proportion and payment period. Due to these givenoptions, the payments for a certain portion of granted shares will be deferred for 5 years maximumafter the retirement date.

3 In general, 40%, 30% and 30% of the number of shares to be granted are determined upon theaccomplishment of the targeted performance results, the targeted relative TSR(Total ShareholderReturn) and the targeted financial results of the Group, respectively. However, as for certain numberof shares, half of the number of shares to be granted is determined based on the accomplishment ofthe targeted relative TSR, while the other half is determined by the targeted performance results.

4 The 35%, 35% and 30% of the number of shares to be granted are determined upon theaccomplishment of the targeted EPS, the targeted relative TSR and the targeted asset quality,respectively.

5 In general, 40%, 30% and 30% of the number of shares to be granted are determined upon theaccomplishment of performance results, relative TSR and evaluation by the Bank’s CEO,respectively. However, as for certain number of shares, half of the number of shares to be granted isdetermined based on the accomplishment of the targeted relative TSR, while the other half isdetermined by the targeted performance results.

6 In general, 40%, 30% and 30% of the number of shares to be granted are determined upon theaccomplishment of performance results, relative TSR and evaluation by the Bank’s CEO,respectively. However, as for certain number of shares, 30% and 70% of the number of shares to begranted are determined based on the accomplishment of relative TSR and the targeted performancerating results.

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Details of share grants linked to short-term performance as of September 30, 2017, are as follows:

Share grants 1 Grant dateNumber of

vested shares Vesting conditionsGranted shares for 2013 2013.01.01 685 VestedGranted shares for 2014 2014.01.01 66,695 VestedGranted shares for 2015 2015.01.01 103,061 VestedGranted shares for 2016 2016.01.01 140,918 VestedGranted shares for 2017 2017.01.01 81,305 Proportion to service period

1Options are given to the executives and employees during the year for deferred paymentschedule(after the retirement date), payment proportion and payment period. Due to these givenoptions, the deferred payment period might be a maximum of five years after the retirement date.

Share grants are measured at fair value using the Monte Carlo Simulation Model and assumptionsused in determining the fair value as of September 30, 2017, are as follows:

(In Korean won)Expected

exercise period(Years)

Risk free rate(%)

Fair value(Market

performancecondition)

Fair value(Non-marketperformancecondition)

Linked to long-termperformanceSeries 64 0.00 ~ 3.25 1.53 57,296 51,601 ~ 55,776Series 65 0.00 ~ 3.25 1.53 57,337 51,601 ~ 55,776Series 66 0.14 ~ 3.25 1.53 55,891 51,807 ~ 55,891Series 67 0.25 ~ 5.25 1.53 55,050 48,983 ~ 55,776Series 68 0.76 ~ 4.25 1.53 54,208 50,429 ~ 54,203Series 69 1.25 ~ 6.25 1.57 53,546 42,824 ~ 54,203Series 70 2.25 ~ 5.25 1.75 50,361 48,983 ~ 52,879Series 71 2.25 ~ 5.25 1.75 51,788 48,983 ~ 52,879Series 72 2.25 ~ 5.25 1.75 51,822 48,983 ~ 52,879Grant deferred in 2014 0.25 1.53 - 55,776Grant deferred in 2015 0.25 ~ 4.25 1.53 - 50,429 ~ 55,776Grant deferred in 2016 0.25 ~ 6.25 1.53 - 47,635 ~ 55,776

Linked to short-termperformanceShare granted in 2013 0.00 1.47 - 42,824Share granted in 2014 0.00 ~ 0.28 1.53 - 42,824 ~ 55,776Share granted in 2015 0.00 ~ 5.25 1.53 - 42,824 ~ 55,776Share granted in 2016 0.25 ~ 6.25 1.53 - 47,635 ~ 55,776Share granted in 2017 1.25 ~ 3.25 1.53 - 51,601 ~ 54,203

Expected volatility is based on the historical volatility of the share price over the most recent periodthat is generally commensurate with the expected term of the grant and the current stock price as ofSeptember 30, 2017, was used for the underlying asset price. Also, the average three-year historicaldividend rate was used as the expected dividend rate.

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As of September 30, 2017 and December 31, 2016, the accrued expenses related to share-basedpayments, including share grants, amounted to 48,181 million and 41,474 million, respectively,and the compensation costs from share grants amounting to 22,432 million and 11,418 millionwere incurred during the nine-month periods ended September 30, 2017 and 2016, respectively.

30.2.2 Mileage Stock

Details of Mileage Stock as of September 30, 2017, are as follows:

(In number of shares)

Grant date

Numberof grantedshares 1

Expectedexercise period

(Years) 1

Number ofexercisableshares 2

Share granted in 2016

2016.01.23 33,829 0.00 ~ 1.31 19,0762016.04.29 60 0.00 ~ 1.58 392016.07.07 280 0.00 ~ 1.77 1562016.07.18 767 - -2016.08.03 107 0.00 ~ 1.84 532016.08.17 51 0.00 ~ 1.88 512016.08.30 256 0.00 ~ 1.92 2302016.09.06 206 0.00 ~ 1.93 1912016.10.07 105 0.00 ~ 2.02 1052016.11.01 118 0.00 ~ 2.09 1182016.12.07 211 0.00 ~ 2.19 1892016.12.08 43 0.00 ~ 2.19 432016.12.15 12 0.00 ~ 2.21 122016.12.20 309 0.00 ~ 2.22 3092016.12.28 76 0.00 ~ 2.24 642016.12.30 210 0.00 ~ 2.25 210

Share granted in 2017

2017.01.09 29,086 0.00 ~ 2.28 25,7562017.02.03 43 0.00 ~ 2.35 432017.04.03 82 0.00 ~ 2.51 822017.05.22 20 0.00 ~ 2.64 202017.07.03 52 0.00 ~ 2.76 522017.08.16 204 0.00 ~ 2.88 2042017.08.17 40 0.00 ~ 2.88 402017.08.22 33 0.00 ~ 2.89 332017.08.25 387 0.00 ~ 2.90 3872017.09.14 82 0.00 ~ 2.96 82

66,669 47,545

1Mileage stock is exercisable for two years after one year from the grant date. When the mileagestock is exercised, the closing price of prior month is applied. However, in case of transfer orretirement during the vesting period, mileage stock is exercisable at the closing price of the lastmonth prior to transfer or retirement.

2 The exercisable shares are assessed based on the stock price as of September 30, 2017. Theseshares are vested immediately at grant date.

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The accrued expenses for share-based payments in regard to mileage stock as of September 30,2017 and December 31, 2016, are 2,667 million and 1,533 million, respectively. Thecompensation costs amounting to 1,299 million and 1,316 million were recognized as anexpense for the nine-month period ended September 30, 2017 and 2016, respectively.

31. Non-operating Income and Expenses

Details of non-operating income and expenses for the three-month and nine-month periods endedSeptember 30, 2017 and 2016, are as follows:


Ninemonths

Threemonths

Ninemonths

Non-operating incomeGains on disposal in property andequipment and assets held for sale 1,447 1,944 706 1,133

Rent received 6,787 19,819 7,043 21,701Others 21,838 73,887 14,281 48,501

30,072 95,650 22,030 71,335Non-operating expensesLosses on disposal in property andequipment and assets held for sale 221 4,303 104 1,087Donation 10,571 21,297 9,899 18,193Restoration cost 757 2,805 396 1,227Others 15,193 28,165 2,369 17,983

26,742 56,570 12,768 38,490Net non-operating income 3,330 39,080 9,262 32,845

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32. Income Tax Expense

Income tax expense for the nine-month periods ended September 30, 2017 and 2016, are as follows:


September 30,2016

Tax payableCurrent tax expense 222,454 381,431Adjustments recognized in the period forcurrent tax of prior years (19,160) 31,633

203,294 413,064Changes in deferred income tax assets (liabilities) 212,038 (6,164)Income tax expense of overseas branches 2,430 2,019Income tax recognized directly in equityChanges in value of available-for-sale financial assets (54,357) (40,868)Changes in exchange difference of foreign operation 340 -Changes in remeasurements of net defined benefit liabilities 2,391 1,853Loss on hedging investment of a net investment in a foreignoperation (334) (2,304)Gain(Loss) on cash flow hedging instruments (596) 56Share of other comprehensive income of associates and others (210) 247

(52,766) (41,016)Consolidated tax effect (12,357) (12,173)Tax expense 1 352,639 355,730

Details of current tax liabilities (income tax payables) and current tax assets (income tax refundreceivables) before offsetting, as of September 30, 2017 and December 31, 2016, are as follows:


December 31,2016

Income tax refund receivables prior to offsetting 1 (92,197) (153,916)Tax payables prior to offsetting 2 227,468 496,910Tax payables after offsetting 135,271 342,994Adjustment on consolidated tax payable and others 3 (12,357) (18,394)Accounts payables 4 (120,262) (319,243)Current tax payable 2,652 5,357

1 Excludes current tax assets of 10,633 million (December 31, 2016: 11,400 million) fromuncertain tax position, which do not qualify for offsetting.

2 Includes income tax payable of 2,652 million (December 31, 2016: 5,357 million) under currenttax liabilities as of September 30, 2017, which are not to be offset against any income tax refundreceivables, such as those of overseas branches.

3 Tax expense reduced due to the adoption of consolidated tax return was reclassified as tax benefit.4 The amount of income tax payable by the Group is reclassified as accounts payable, not to the taxauthority, but to KB Financial Group Inc. due to the adoption of consolidated tax return.

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33. Dividends

The dividends to the shareholder in respect of the year ended December 31, 2016, amounting to359,493 million, were paid in March 2017.

34. Accumulated Other Comprehensive Income

Details of accumulated other comprehensive income for the nine-month periods ended September30, 2017 and 2016, are as follows:


Beginning

Changes(excluding

reclassification)Reclassificationto profit or loss Tax effect

Classified asassets heldfor sale Ending

Remeasurements of net definedbenefit liabilities (94,079) (9,881) - 2,391 - (101,569)Currency translation differences 27,509 (7,662) - 340 - 20,187Gain(loss) on valuation ofavailable-for-sale financial assets 680,965 170,545 53,235 (54,357) - 850,388Share of other comprehensiveincome of associates (87,577) 869 - 21,288 67,337 1,917Gain(loss) on cash flow hedginginstruments 337 2,908 (445) (596) - 2,204Gain(loss) on hedging instrumentsof a net investment in foreignoperations (32,292) 1,380 - (334) - (31,246)Accumulated other comprehensiveincome related to held for sale - - 88,835 (21,498) (67,337) -

494,863 158,159 141,625 (52,766) - 741,881


Beginning

Changes(excluding

reclassification)Reclassificationto profit or loss Tax effect Ending

Remeasurements of net definedbenefit liabilities (102,182) (7,658) - 1,853 (107,987)Currency translation differences 32,993 (51,445) - - (18,452)Gain(loss) on valuation of available-for-sale financial assets 682,818 256,447 (86,475) (40,868) 811,922Gain(loss) on valuation of equitymethod investments (87,346) (1,022) - 247 (88,121)Gain(loss) on cash flow hedginginstruments - (231) - 56 (175)Gain(loss) on hedges of a netinvestment in a foreign operations (25,476) 9,520 - (2,304) (18,260)

500,807 205,611 (86,475) (41,016) 578,927

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35. Trust Accounts

Financial information of the trust accounts the Group manages as of September 30, 2017 andDecember 31, 2016, and for the nine-month periods ended September 30, 2017 and 2016, is asfollows:

(In millions of Korean won) Total assets Operating revenuesSeptember 30,

2017December 31,

2016September 30,

2017September 30,

2016Consolidated 4,112,976 3,978,501 82,546 99,137Unconsolidated 44,321,409 43,653,701 1,624,434 822,752

48,434,385 47,632,202 1,706,980 921,889

1 Financial information of the trust accounts has been prepared in accordance with the Statement ofKorea Accounting Standard 5004, Trust Accounts, and enforcement regulations of FinancialInvestment Services under the Financial Investment Services and Capital Markets Act.

Significant receivables and payables related to the Group’s trust accounts as of September 30, 2017and December 31, 2016, are as follows:

(In millions of Korean won) September 30, 2017 December 31, 2016AssetsAccrued trust fees 34,822 28,855

LiabilitiesDue to trust accounts 5,593,261 4,430,508Accrued interest on due to trust accounts 6,961 6,767

5,600,222 4,437,275

Significant revenue and expenses related to the Group’s trust for the nine-month periods endedSeptember 30, 2017 and 2016, are as follows:

(In millions of Korean won) September 30, 2017 September 30, 2016RevenuesFees and commissions from trust accounts 213,658 136,173Commissions from early termination in trustaccounts 66 47

213,724 136,220ExpensesInterest expenses on due to trust accounts 30,505 28,182

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36. Supplemental Cash Flow Information

Cash and cash equivalents as of September 30, 2017 and December 31, 2016, are as follows:

(In millions of Korean won) September 30, 2017 December 31, 2016Cash 2,372,259 2,154,729Checks with other banks 481,004 400,422Due from Bank of Korea 11,591,250 7,676,491Due from other financial institutions 4,294,989 4,450,204

18,739,502 14,681,846Restricted due from financial institutions (11,910,894) (7,859,701)Due from financial institutions with originalmaturities over three months (485,664) (483,987)

(12,396,558) (8,343,688)6,342,944 6,338,158

Cash inflows and outflows from income tax, interest and dividends for the nine-month periods endedSeptember 30, 2017 and 2016, are as follows:

(In millions of Korean won)Activities

September 30,2017

September 30,2016

Income tax paid Operating 386,176 102,717Interest received Operating 6,709,749 6,084,820Interest paid Operating 2,159,700 2,341,784Dividends received Operating 91,002 69,102Dividends paid Financing 357,111 380,521

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37. Contingent Liabilities and Commitments

Acceptances and guarantees as of September 30, 2017 and December 31, 2016, are as follows:

(In millions of Korean won) September 30, 2017 December 31, 2016Confirmed acceptances and guaranteesConfirmed acceptances and guaranteesin Korean wonAcceptances and guarantees for KB purchasingloan 343,104 329,051Others 597,926 588,950

941,030 918,001Confirmed acceptances and guaranteesin foreign currenciesAcceptances of letter of credit 184,741 234,125Letter of guarantees 65,215 64,189Bid bond 49,419 64,242Performance bond 629,418 703,076Refund guarantees 915,210 1,689,343Others 2,118,333 1,593,770

3,962,336 4,348,745Financial guaranteesAcceptances and guarantee for issue ofdebentures 31,000 31,000Acceptances and guarantees for mortgage 43,301 25,994Overseas debt guarantees 307,942 272,255International financing guarantees in foreigncurrencies 50,253 52,961Others 270,000 270,000

702,496 652,2105,605,862 5,918,956

Unconfirmed acceptances and guaranteesGuarantees of letter of credit 2,676,191 2,068,106Refund guarantees 223,114 217,272

2,899,305 2,285,3788,505,167 8,204,334

Acceptances and guarantees by counterparty as of September 30, 2017 and December 31, 2016, areas follows:


Confirmedguarantees

Unconfirmedguarantees Total

Proportion(%)

Large companies 4,712,252 2,147,005 6,859,257 80.65Small medium sizedcompanies 617,486 518,356 1,135,842 13.35Public and others 276,124 233,944 510,068 6.00

5,605,862 2,899,305 8,505,167 100.00

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Confirmedguarantees


Proportion(%)

Large companies 5,129,393 1,644,556 6,773,949 82.57Small medium sizedcompanies 623,422 479,515 1,102,937 13.44Public and others 166,141 161,307 327,448 3.99

5,918,956 2,285,378 8,204,334 100.00

Acceptances and guarantees by industry as of September 30, 2017 and December 31, 2016, are asfollows:


Confirmedguarantees


Proportion(%)

Financial institutions 87,054 7,013 94,067 1.11Manufacturing 3,109,790 1,433,216 4,543,006 53.41Service 751,609 105,707 857,316 10.08Wholesale and retail 975,501 754,357 1,729,858 20.34Construction 405,023 349,204 754,227 8.87Public 177,916 129,053 306,969 3.61Others 98,969 120,755 219,724 2.58

5,605,862 2,899,305 8,505,167 100.00


Confirmedguarantees


Proportion(%)

Financial institutions 74,282 3,710 77,992 0.95Manufacturing 3,315,257 1,141,571 4,456,828 54.32Service 765,051 63,847 828,898 10.10Wholesale and retail 1,171,151 779,163 1,950,314 23.77Construction 509,329 129,111 638,440 7.78Public 82,646 92,445 175,091 2.13Others 1,240 75,531 76,771 0.95

5,918,956 2,285,378 8,204,334 100.00

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Commitments as of September 30, 2017 and December 31, 2016, are as follows:

(In millions of Korean won) September 30, 2017 December 31, 2016CommitmentsCorporate loan commitments 33,046,643 36,012,231Retail loan commitments 16,308,381 15,727,639Other acceptance and guarantees in Koreanwon 1,000,000 1,000,000Purchase of securities 1,119,703 1,521,778

51,474,727 54,261,648Financial GuaranteesCredit line 2,190,348 2,418,997Purchase of securities 308,800 290,100

2,499,148 2,709,09753,973,875 56,970,745

Other Matters (including litigation)

a) The Bank has filed 94 lawsuits (excluding minor lawsuits in relation to the collection ormanagement of loans), as the plaintiff, involving aggregate claims of 438,107 million, and faces108 lawsuits as the defendant (excluding minor lawsuits in relation to the collection or management ofloans) involving aggregate damages of 202,006 million, which arose in the normal course of thebusiness and are still pending as of September 30, 2017.

b) The face values of the securities sold to general customers through tellers sale amount to372 million and 5,731 million as of September 30, 2017 and December 31, 2016, respectively.

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38. Subsidiaries

Details of subsidiaries as of September 30, 2017, are as follows:

Investor Investee Ownership (%) Location IndustryKookmin Bank Kookmin Bank Int'l Ltd.(London) 100.00 United

KingdomBanking and foreignexchange transaction

Kookmin Bank Kookmin Bank Hong Kong Ltd.1 100.00 China Banking and foreignexchange transaction

Kookmin Bank Kookmin Bank Cambodia PLC. 100.00 Cambodia Banking and foreignexchange transaction

Kookmin Bank Kookmin Bank (China) Ltd.2 100.00 China Banking and foreignexchange transaction

Kookmin Bank KB Microfinance Myanmar Co., Ltd. 100.00 Myanmar Micro finance servicesKookmin Bank Personal pension trust and 10 others 3 - Korea TrustKookmin Bank KL the 1st L.L.C. and 28 others 4 - Korea Asset-backed

securitization and othersKookmin Bank KB Haeorum Private securities 26 and

6 others 5100.00 Korea Private equity fund

Kookmin Bank KB Wise Star Private Real EstateFeeder Fund 1 5

86.00 Korea Investment Trust

KB Wise Star Private Real EstateFeeder Fund 1

KB Star Retail Private Real EstateMaster Fund 1 4


KB Wise Star Private Real EstateFeeder Fund 1

KB Star Office Private Real EstateMaster Fund 2 4


Kookmin Bank KB Multi-Asset Private SecuritiesFund1 (Bond Mixed-FoFs) 5


KB Multi-Asset Private SecuritiesFund1 (Bond Mixed-FoFs)

Global Diversified Multi-Asset Sub-Trust Class I A

100.00 UnitedKingdom

Investment Trust

Kookmin Bank KB KBSTAR Short Term KTB ActiveETF 5


Kookmin Bank KB KBSTAR Mid-Long Term KTBActive ETF 5


Kookmin Bank KB Multi-Asset Private SecuritiesFundS-1 (Bond Mixed) Class-C 5


Kookmin Bank KB Multiasset PrivateSecuritiesFeeder Fund P-1 (BondMixed) C 5


KB Multiasset PrivateSecuritiesFeeder Fund P-1 (BondMixed) C

KB Multiasset PrivateSecuritiesMaster Fund P-1 (BondMixed)


Kookmin Bank SAMSUNG KODEX 10Y F-LKTB INVETF 5


1 On January 4, 2017, the Bank converted Kookmin Bank Hong Kong Ltd. into a Hong Kong branch of the Bank.This conversion is a business combination of entities under common control. The Bank accounted the businesscombination under carrying amount method, and the transferred assets and liabilities are measured at thecarrying amount included in the consolidated financial statements. At the date of the combination, thetransferred assets and liabilities amounted to 855,731 million and 852,993 million, respectively.

2 Kookmin Bank (China) Ltd.’s functional currency has changed from USD to CNY in 2016.3 The Bank controls the trust because it has power that determines the management performance over the trust,and is exposed to variable returns to absorb losses through the guarantees of payment of principal or, paymentof principal and fixed rate of return.

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Kookmin Bank and SubsidiariesNotes to the Interim Consolidated Financial StatementsSeptember 30, 2017 and 2016 (Unaudited), and December 31, 20164 The Bank controls these investees because it is exposed to variable returns from its involvement with theinvestees, and has ability to affect those returns through its power, even though it holds less than a majority ofthe voting rights of the investees.

5 The Bank controls these investees because it is exposed to variable returns from its involvement with theinvestees, and has ability to affect those returns through its power.

The condensed financial information of major subsidiaries as of September 30, 2017 and December31, 2016, and for the nine-month periods ended September 30, 2017 and 2016, is as follows:


Assets Liabilities EquityOperatingrevenue

Profit(Loss)for the period

Kookmin Bank Int'lLtd.(London) 576,486 487,900 88,586 11,630 2,406

Kookmin BankHong Kong Ltd. 24,670 632 24,038 - (2,398)

Kookmin Bank CambodiaPLC. 164,440 103,752 60,688 6,035 1,256

Kookmin Bank(China) Ltd. 2,106,966 1,687,576 419,390 51,042 (1,562)

KB MicrofinanceMyanmar Co., Ltd. 5,488 227 5,261 322 (425)

Personal pension trustand 10 others 4,137,749 4,031,782 105,967 83,228 3,301

(In millions of Korean won) December 31, 2016 September 30, 2016

Assets Liabilities EquityOperatingrevenue

Profitfor the period

Kookmin Bank Int'lLtd.(London) 501,788 410,962 90,826 10,022 2,676Kookmin Bank Hong KongLtd. 926,001 760,112 165,889 13,876 4,792Kookmin Bank CambodiaPLC. 162,133 99,510 62,623 5,203 737Kookmin Bank (China)Ltd. 1,838,326 1,415,062 423,264 41,479 2,374Personal pension trust and10 others 4,016,964 3,913,743 103,221 121,109 2,025

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Nature of the risks associated with interests in consolidated structured entities

Terms of contractual arrangements that provide financial support to a consolidated structured entity

- The Bank provides the capital commitment of 258,000 million to KB Wise Star Private Real EstateFeeder Fund 1st, of which 185,717 million has not been utilized. Based on the investmentagreement, the Bank is subject to increase its investment upon the request of the asset managementcompany or the additional agreement among investors.

- The Bank has provided purchase commitment and grant of credit to the structured entities that areconsidered as subsidiaries. The Bank should purchase unsold commercial paper securities if there isa shortage of the investors for the commercial paper securities issued by the structured entity. Ifevents causing the cessation of the issuance of commercial paper securities occur or if the structuredentities become insolvent, the Bank should provide loans to the structured entities under certainconditions.


LIIV FOR RENTAL 1st L.L.C. 70,116Silver Investment 2nd Inc. 50,000HLD the 3rd L.L.C. 104,600LOG the 3rd L.L.C. 20,900Icheon Albatross L.L.C. 30,162KDL the 1st L.L.C. 50,209KBC the 2nd L.L.C. 50,083KBC the 1st L.L.C. 35,070KBH the 3rd L.L.C. 50,077KBH the 2nd L.L.C. 30,140KBH the 1st L.L.C. 20,059KBM the 1st L.L.C. 50,167KBY the 1st L.L.C. 13,760KB INO 1st L.L.C. 50,135KB HUB the 1st L.L.C. 30,093KH the 4th L.L.C. 25,078KH the 3rd L.L.C. 70,100KH the 2nd L.L.C. 40,599KLD the 1st L.L.C. 8,100KL the International 1st L.L.C. 40,254KL the 3rd L.L.C. 30,106KL the 1st L.L.C. 50,126KL Food the 1st L.L.C. 50,112KY the 1st L.L.C. 24,030KB Green the 1st L.L.C. 17,649

147


- The Bank provides the guarantees of payment of principal or principal and fixed rate of return, incase the operating results of the trusts are less than the guaranteed principal or principal and a fixedrate of return.

Changes in subsidiaries

KB Microfinance Myanmar Co., Ltd. and 16 other subsidiaries were newly consolidated during thenine-month period ended September 30, 2017.

39. Unconsolidated Structured Entity

The nature, purpose and activities of the unconsolidated structured entities and how the structuredentities are financed, are as follows:

Nature Purpose Activities Methods of FinancingAsset-backedsecuritization

Early cash generationthrough transfer ofsecuritization assetsFees earned as servicesto SPC, such asproviding lines of creditand ABCP purchasecommitments

Fulfillment of Asset-backed securitizationplanPurchase and collectionsecuritization assetsIssuance and repaymentof ABS and ABCP

Issuance of ABS andABCP based onsecuritization assets

ProjectFinancing

Granting PF loans relatedto SOC and realpropertyGranting loans toships/aircrafts SPC

Construction of SOC andreal propertyBuilding ships/Construction andpurchase of aircrafts

Loan commitmentsthrough Credit Line,providing lines of creditand investmentagreements

Investmentfunds

Investment in beneficiarycertificatesInvestment in PEF andpartnerships

Management of fundassetsPayment of fund fees andallocation of fund profits

Sales of beneficiarycertificate instrumentsInvestment of generalpartners and limitedpartners

148


As of September 30, 2017 and December 31, 2016, the size of the unconsolidated structured entitiesand the risks associated with its interests in unconsolidated structured entities are as follows:

(In millions of Korean won) September 30, 2017Asset-backedsecuritization

Projectfinancing

Investmentfunds Others Total

Total assets of theunconsolidatedstructured entities 95,128,025 21,315,840 21,982,882 7,122,625 145,549,372Carrying amount onfinancial statementsAssetsFinancial assets at fairvalue through profitor loss 223,543 - - - 223,543Derivative financialassets 81 - - - 81Loans 303,285 1,996,813 - 324,890 2,624,988Financial investments 6,226,764 7,867 3,110,537 16,436 9,361,604Investments in associates - - 231,597 - 231,597

6,753,673 2,004,680 3,342,134 341,326 12,441,813LiabilitiesDeposits 482,199 798,947 78,016 3,339 1,362,501Others 1 35 33 - 69

482,200 798,982 78,049 3,339 1,362,570Maximum exposure to lossAssets 1 6,753,673 2,004,680 3,342,134 341,326 12,441,813Purchase andcapital commitments - - 1,199,960 - 1,199,960Unused providing lines ofcredit 2,190,347 - - - 2,190,347

Acceptances andguarantees and Loancommitments 336,300 1,290,000 - - 1,626,300

9,280,320 3,294,680 4,542,094 341,326 17,458,420

Methods of determiningthe maximum exposureto loss

Providing linesof credit /Purchase

commitments /Acceptancesand guaranteesand Loan

commitments

Loan commitments /Capital commitments /

Purchasecommitments andAcceptances andguarantees

Capitalcommitments

Loancommitments

149


(In millions of Korean won) December 31, 2016Asset-backedsecuritization

Projectfinancing

Investmentfunds Others Total

Total assets of theunconsolidatedstructured entities 70,019,012 21,562,287 15,125,330 2,140,135 108,846,764Carrying amount onfinancial statementsAssetsFinancial assets at fairvalue through profitor loss 129,742 - - - 129,742Derivative financialassets 110 - - - 110Loans 438,711 2,283,110 - 146,256 2,868,077Financial investments 6,394,577 8,595 3,654,414 17,046 10,074,632Investments in associates - - 229,561 - 229,561

6,963,140 2,291,705 3,883,975 163,302 13,302,122LiabilitiesDeposits 528,035 703,049 49,587 6,857 1,287,528

528,035 703,049 49,587 6,857 1,287,528Maximum exposure to lossAssets 1 6,963,140 2,291,705 3,883,975 163,302 13,302,122Purchase andcapital commitments - - 1,620,871 - 1,620,871

Unused providing lines ofcredit 2,420,854 - - - 2,420,854

Acceptances andguarantees and Loancommitments 290,100 1,475,760 - - 1,765,860

9,674,094 3,767,465 5,504,846 163,302 19,109,707

Methods of determiningthe maximum exposureto loss

Providing linesof credit /Purchase

commitments /Acceptancesand guaranteesand Loan

commitments

Loan commitments /Capital commitments /

Purchasecommitments andAcceptances andguarantees

Capitalcommitments

Loancommitments

1 Maximum exposure to loss includes the asset amounts, after deducting loss (provision for assets, impairmentlosses and others), recognized in the consolidated financial statements of the Group.

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40. Finance and Operating Leases

40.1 Finance Lease

The future minimum lease payments as of September 30, 2017 and December 31, 2016, are asfollows:

(In millions of Korean won) September 30, 2017 December 31, 2016Net carrying amount of finance lease assets 18,343 24,290Minimum lease paymentsWithin 1 year 417 1,5721-5 years - 54

417 1,626Present value of minimum lease paymentsWithin 1 year 415 1,5511-5 years - 54

415 1,605

40.2 Operating Lease

40.2.1 The Group as an Operating Lessee

The future minimum lease payments arising from the non-cancellable lease contracts as ofSeptember 30, 2017 and December 31, 2016, are as follows:

(In millions of Korean won) September 30, 2017 December 31, 2016Minimum lease paymentsWithin 1 year 120,891 116,5051-5 years 141,837 133,381Over 5 years 34,163 34,488

296,891 284,374

Minimum sublease payments (1,565) (1,891)

The lease payments reflected in profit or loss for the nine-month periods ended September 30, 2017and 2016, are as follows:


Lease payments reflected in profit or lossMinimum lease payments 118,358 123,454Sublease payments (839) (695)

117,519 122,759

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40.2.2 The Group as an Operating Lessor

The future minimum lease receipts arising from the non-cancellable lease contracts as of September30, 2017 and December 31, 2016, are as follows:

(In millions of Korean won) September 30, 2017 December 31, 2016Minimum lease receiptsWithin 1 year 18,925 18,3831-5 years 36,391 33,031

55,316 51,414

41. Related Party Transactions

Profit and loss arising from transactions with related parties for the nine-month periods endedSeptember 30, 2017 and 2016, are as follows:


September 30,2016

ParentKB Financial Group Inc. Fee and commission income 2,142 2,232

Other operating income 110 -Other non-operating income 575 530Interest expense 2,917 2,007General and administrativeexpenses

522 39

Parent’s subsidiariesKB Asset Management Co., Ltd. Fee and commission income 838 612

Other non-operating income 3 3Interest expense 254 585Fee and commission expense 724 475

KB Real Estate Trust Co., Ltd. Fee and commission income 86 10Other non-operating income 33 28Interest expense 131 111Fee and commission expense 1,400 933

KB Investment Co., Ltd. Fee and commission income 27 -Interest expense 192 405

KB Credit Information Co., Ltd. Fee and commission income 50 14Other non-operating income 172 226Interest expense 63 102Fee and commission expense 10,529 12,030General and administrativeexpenses

275 -

KB Data System Co., Ltd. Fee and commission income 98 9Other non-operating income 66 56Interest expense 114 130General and administrativeexpenses

32,364 11,322

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KB Life Insurance Co., Ltd. Fee and commission income 11,595 9,317Gains on financial assets/liabilities at fair value throughprofit or loss

2,833 -

Other non-operating income 3,168 94Interest expense 724 721Fee and commission expense 2 -Losses on financial assets/liabilities at fair value throughprofit or loss

1,705 -

General and administrativeexpenses

1,345 1,457

KB Kookmin Card Co., Ltd. Interest income 2,472 2,431Fee and commission income 178,740 182,105Gains on financial assets/liabilities at fair value throughprofit or loss

37 -

Other non-operating income 855 884Interest expense 1,115 2,554Fee and commission expense 485 158Losses on financial assets/liabilities at fair value throughprofit or loss

2,801 1,435

Provision for credit losses - 70General and administrativeexpenses

290 -

KB Savings Bank Co., Ltd. Fee and commission income 189 191Other non-operating income 36 29Interest expense 5 -Fee and commission expense 6 -

KB Capital Co., Ltd. Fee and commission income 1,107 320Other non-operating income 108 78Interest expense 60 3Fee and commission expense 18 -

KB Insurance Co., Ltd. Interest income 39 45Fee and commission income 17,134 5,944Gains on financial assets/liabilities at fair value throughprofit or loss

5,631 887

Reversal of credit losses - 30Other non-operating income 170 82Interest expense 2,575 822Losses on financial assets/liabilities at fair value throughprofit or loss

34,502 22,879

Other operating expense 12 -General and administrativeexpenses

9,187 7,683

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KB Securities Co., Ltd. Interest income 8 1,632Fee and commission income 9,623 5,364Gains on financial assets/liabilities at fair value throughprofit or loss

2,479 3,272

Other operating income - 13Reversal of credit losses 137 4Other non-operating income 6,749 798Interest expense 1,836 1,597Fee and commission expense 72 372Losses on financial assets/liabilities at fair value throughprofit or loss

6,059 5,342

Provision for credit losses - 37General and administrativeexpenses

1,758 -

Hanbando BTL Private Special Asset Fund Fee and commission income 114 135KB Senior Loan Private Fund No.1 Fee and commission income 24 23KB AMP Infra Private Special Asset Fund 1(FoFs)

Fee and commission income 8 -

KB Mezzanine Private Securities Fund 1 Fee and commission income - 52AssociatesKorea Credit Bureau Co., Ltd. Fee and commission income 3 3

Interest expense 87 67Incheon Bridge Co., Ltd. Interest income 23,096 11,280

Reversal of credit losses 42 -Interest expense 230 275Provision for credit losses - 30

MJT&I Co., Ltd. Interest income - 2Jaeyang Industry Co., Ltd. Interest income 98 -

Reversal of credit losses 6 26Dongjo Co., Ltd. Reversal of credit losses 1 -Dae-A Leisure Co., Ltd. Interest expense 1 -Paroman Corporation Co., Ltd. Reversal of credit losses 345 -KB12-1 Venture Investment Partnership Interest expense 14 33KB High-tech Company Investment Fund Fee and commission income - 3

Interest expense 46 56Aju Good Technology Venture Fund Interest expense 11 -KB Star Office Private Real Estate InvestmentTrust No.1

Interest expense 44 67

UAMCO Ltd.1 Fee and commission income - 5Interest expense - 1

United PF 1st Recovery Private Equity Fund 1 Interest expense - 1Associates of parent’s subsidiariesKB No.5 Special Purpose AcquisitionCompany 1

Interest expense - 19

154


KB No.6 Special Purpose AcquisitionCompany 1


KB No.7 Special Purpose AcquisitionCompany 1


KB No.8 Special Purpose AcquisitionCompany





Interest expense 17 -

SY Auto Capital Co., Ltd. Interest income 102 114Reversal of credit losses 32 -Interest expense 20 9Provision for credit losses - 61

RAND Bio Science Co., Ltd. Interest expense 14 7Inno Lending Co., Ltd. Fee and commission income 2 -

Interest expense 1 -Wise Asset Management Co., Ltd. Interest expense 4 -KB IC 3rd Private Equity Fund 1 Interest expense - 9

OtherRetirement pension Fee and commission income 607 533


1 Not considered to be the Group's related party as of September 30, 2017.

Details of receivables and payables, and related allowances for loan losses arising from the relatedparty transactions as of September 30, 2017 and December 31, 2016, are as follows:

(In millions of Korean won) September 30, 2017 December 31, 2016ParentKB Financial Group Inc. Other assets 2,097 3,313

Deposits 286,683 57,967Other liabilities 191,141 426,522

Parent’s subsidiariesKB Asset Management Co., Ltd. Other assets 295 226

Deposits 8,133 73,279Other liabilities 250 410

KB Real Estate Trust Co., Ltd. Other assets 36 -Deposits 16,782 21,211Other liabilities 344 353

KB Investment Co., Ltd. Other assets 11 -Deposits 20,749 23,954Other liabilities 51 55

KB Credit Information Co., Ltd. Other assets 13 6Deposits 5,410 3,465Other liabilities 5,708 6,439

KB Data System Co., Ltd. Other assets 2,205 2,312Deposits 15,798 10,926Other liabilities 4,896 2,366

KB Life Insurance Co., Ltd. Other assets 1,842 976Derivative assets 2,597 2,018

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Deposits 476 700Debts 25,000 25,000Other liabilities 3,197 3,136

KB Kookmin Card Co., Ltd. Other assets 27,456 25,573Derivative assets 835 3,376Deposits 96,431 160,002Provisions 486 485Other liabilities 53,271 50,231Derivative liabilities 276 -

KB Savings Bank Co., Ltd. Other assets 32 77Other liabilities 389 378

KB Capital Co., Ltd. Other assets 318 17Deposits 61,225 9,075Other liabilities 34 -

KB Insurance Co., Ltd. Other assets 11,479 8,372Derivative assets 7,453 3,941Deposits 7,340 9,883Debts 20,000 20,000Debentures 49,979 -Other liabilities 2,736 1,240Derivative liabilities 1,016 2,811

KB Securities Co., Ltd. Cash and due fromfinancial institutions

429 284

Other assets 4,344 395Derivative assets 1,501 2,739Deposits 294,960 116,893Debentures - 300Provisions 97 234Other liabilities 15,499 191,719Derivative liabilities 867 2,018

Hanbando BTL Private Special Asset Fund Other assets 28 44KB Senior Loan Private Fund No.1 Other assets 7 8KB AMP Infra Private Special Asset Fund 1(FoFs)

Other assets 1 -

AssociatesKorea Credit Bureau Co., Ltd. Deposits 11,737 26,827

Other liabilities 65 75Incheon Bridge Co., Ltd. Gross amounts of loans 202,500 209,094

Allowances 288 330Other assets 753 821Deposits 51,370 38,556Other liabilities 35 166

Jungdong Steel Co., Ltd. Deposits 3 3Jaeyang Industry Co., Ltd. Gross amounts of loans - 303

Allowances - 6Other assets - 7

Jungdo Co., Ltd. Deposits 4 -Dongjo Co., Ltd. Gross amounts of loans 246 -

Allowances 2 -Dae-A Leisure Co., Ltd. Deposits 466 -

Other liabilities 14 -Paroman Corporation Co., Ltd. Gross amounts of loans 283 -

Allowances 37 -Other assets 3 -Provisions 2 -

156


KB12-1 Venture Investment Partnership Deposits 755 4,562Other liabilities - 2

KB High-tech Company Investment Fund Deposits 8,040 4,643Other liabilities - 4

Aju Good Technology Venture Fund Deposits 4,886 1,201Other liabilities 1 1

KB Star office private real estate InvestmentTrust No.1


JSC Bank CenterCredit 1 Cash and due fromfinancial institutions

- 8

EJADE Co., Ltd.1 Deposits - 2Associates of Parent’s subsidiariesKB No.8 Special Purpose AcquisitionCompany


SY Auto Capital Co., Ltd. Gross amounts of loans - 10,000Allowances - 32Other assets - 6Deposits 1,007 3,997Provisions 29 29Other liabilities - 6



RAND Bio Science Co., Ltd. Deposits 1,459 2,356Other liabilities 8 12



Inno Lending Co., Ltd. Deposits 50 1,902Wise Asset Management Co., Ltd. Deposits 293 -

Other liabilities 1 -Built On Co., Ltd. Deposits 48 -Food Factory Co., Ltd. Deposits 466 -ACTS Co., Ltd. Deposits 298 -POSCO-KB Shipbuilding RestructuringFund

Deposits 3,000 -

isMedia Co., Ltd.1 Provisions - 4KB IC 3rd Private Equity Fund 1 Deposits - 700

Other liabilities - 1Key management Gross amounts of loans 1,470 1,938

Other assets 2 2Deposits 8,761 8,043Other liabilities 133 138

OthersRetirement pension Other assets 510 304

Deposits - 1,464Other liabilities 25 16,497


In accordance with Korean IFRS 1024, the Group includes the Parent, the Parent’s subsidiaries,associates, associates of the Parent’s subsidiaries, key management (including family members), andpost-employment benefit plans of the Group and entities regarded as its related parties in the scopeof its related parties. Additionally, the Group discloses balances (receivables and payables) and otheramounts arising from the related party transactions in the notes to the interim consolidated financialstatements. Refer to Note 13 for details on investments in associates.

157


Key management includes the directors of the Parent company and the executive directors (vicepresidents and above) of the Bank and companies where the directors and /or their close familymembers have control or joint control.

Notional amount of derivative assets and liabilities arising from the related party transactions as ofSeptember 30, 2017 and December 31, 2016, are as follows:

(In millions of Korean won) September 30, 2017 December 31, 2016Parent’s subsidiariesKB Kookmin Card Co., Ltd. Notional amount of Derivative

financial instruments 87,335 90,425KB Life Insurance Co., Ltd. Notional amount of Derivative

financial instruments 165,000 25,076KB Securities Co., Ltd. Notional amount of Derivative

financial instruments 206,094 226,678KB Insurance Co., Ltd. Notional amount of Derivative

financial instruments 456,990 251,833

Significant loan transactions with related parties for the nine-month periods ended September 30, 2017and 2016, are as follows:

(In millions of Korean won) September 30, 2017 1Beginning Loans Repayments Ending

Parent’s subsidiariesKB Securities Co., Ltd. - 2,623 2,623 -KB Kookmin Card Co., Ltd. - 3,670 3,670 -

AssociateIncheon Bridge Co., Ltd. 209,094 202,500 209,094 202,500

Associate of Parent’s subsidiarySY Auto Capital Co., Ltd. 10,000 9,997 19,997 -

(In millions of Korean won) September 30, 2016 1Beginning Loans Repayments Ending

Parent’s subsidiariesKB Securities Co., Ltd. 8,438 - 8,438 -KB Kookmin Card Co., Ltd. - 1,910 1,910 -

AssociateIncheon Bridge Co., Ltd. 231,653 4,000 23,678 211,975

Associate of Parent’s subsidiarySY Auto Capital Co., Ltd. - 10,000 - 10,000

1 Transactions and balances arising from operating activities between related parties, such as settlements, areexcluded.

The settlement transactions and deposits arising from operating activities with related parties areexcluded and there are no other borrowing transactions.

158


Unused commitments provided to related parties as of September 30, 2017 and December 31, 2016,are as follows:

(In millions of Korean won) September 30, 2017 December 31, 2016Parent’s subsidiariesKB Investment Co., Ltd. Purchase of securities 200

Loss sharing agreements 1,000 1,000KB Kookmin Card Co., Ltd. Loan commitment in

Korean won 520,000 520,000Other commitments inKorean won 1,000,000 1,000,000

KB Securities Co., Ltd. Loan commitment inKorean won 140,000 192,500

Hanbando BTL Private Special Asset Fund Purchase of securities - 15,931Hope Sharing BTL Private Special Asset Fund Purchase of securities - 48,045KB Mezzanine Private SecurityInvestment Trust No.2

Purchase of securities 11,141 30,589

KB Senior Loan Private Fund No.1 Purchase of securities 3,770 35,958AssociatesBalhae Infrastructure Fund Purchase of securities 12,564 13,371Incheon Bridge Co., Ltd. Loan commitment in

Korean won 20,000 50,000Paroman Corporation Co., Ltd. Other commitments in

foreign currency 15 -KoFC KBIC Frontier Champ 2010-5 (PEF) Purchase of securities 1,290 1,290KB GwS Private Securities Investment Trust Purchase of securities 876 876KoFC POSCO HANWHA KB Shared GrowthNo.2. Private Equity Fund

Purchase of securities 10,040 10,040

Future Planning KB Start-up Creation Fund Purchase of securities - 4,000KB High-tech Company Investment Fund Purchase of securities - 10,000Aju Good Technology Venture Fund Purchase of securities 13,153 18,000Associates of Parent’s subsidiariesSY Auto Capital Co., Ltd. Loan commitment in

Korean won 10,000 10,000isMedia Co., Ltd.1 Loan commitment in

Korean won - 1,260Key management Loan commitment in

Korean won 477 437


Unused commitments received from related parties as of September 30, 2017 and December 31, 2016,are as follows:


December 31,2016

Parent’s subsidiariesKB Investment Co., Ltd. Loss sharing agreements 12,122 10,967KB Real Estate Trust Co., Ltd. Purchase of securities 4,319 4,319KB Life Insurance Co., Ltd. Purchase of securities 21,595 21,595KB Securities Co., Ltd. Purchase of securities 4,319 4,319KB Kookmin Card Co., Ltd. Loan commitment in Korean won 81,353 77,967

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Compensation to key management for the nine-month periods ended September 30, 2017 and 2016,consists of:

(In millions of Korean won) September 30, 2017Short-termemployeebenefits

Post-employmentbenefits

Share-basedpayments Total

Registered directors(executive) 966 41 1,008 2,015Registered directors(non-executive) 235 - - 235Non-registered directors 3,769 170 5,589 9,528

4,970 211 6,597 11,778

(In millions of Korean won) September 30, 2016Short-termemployeebenefits

Post-employmentbenefits

Share-basedpayments Total

Registered directors(executive) 691 30 775 1,496Registered directors(non-executive) 224 - - 224Non-registered directors 2,935 117 3,000 6,052

3,850 147 3,775 7,772

Significant operating transactions occurring between the Group and related parties include theestablishment of deposit accounts, issuance of general purpose loans, loans on businesstransactions and trade receivables, and overdraft credit accounts arising from net settlementagreement between the Bank and KB Kookmin Card Co., Ltd.

Collateral offered to related parties as of September 30, 2017 and December 31, 2016, is as follows:


Assets pledgedCarryingamount

Collateralizedamount

Carryingamount

Collateralizedamount

Parent’s subsidiariesKB Securities Co., Ltd. Securities 76,005 76,000 74,964 75,000KB Life Insurance Co., Ltd. Securities 26,145 25,000 26,197 25,000

Building/ Land 229,092 32,500 217,369 32,500KB Insurance Co., Ltd. Securities 50,000 50,000 50,000 50,000

Building/ Land 229,092 26,000 217,369 26,000

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Collateral received from related parties as of September 30, 2017 and December 31, 2016, is asfollows:

(In millions of Korean won) September 30, 2017 December 31, 2016Parent’s subsidiariesKB Securities Co., Ltd. Time deposits/ Beneficiary

right certificate 167,000 206,250Securities 20,000 20,000

KB Life Insurance Co., Ltd. Securities 10,000 10,000KB Kookmin Card Co., Ltd. Time deposits 22,000 22,000KB Insurance Co., Ltd. Securities 54,000 50,000

Key management Time deposits and others 388 251Real estate 2,287 2,759

As of September 30, 2017, Incheon Bridge Co., Ltd, a related party, provides fund managementaccount, civil engineering completed risk insurance management rights as unsubordinated collateralin respect to collateralized amount for 611,000 million to a financial syndicate consisting of theBank and five other institutions, and as subordinated collateral in respect to collateralized amount for384,800 million to subordinated debt holders consisting of the Bank and two other institutions.

Also, it provides certificate of credit guarantee amounting to 400,000 million as collateral to afinancial syndicate consisting of the Bank and five other institutions.

The Bank and KB Kookmin Card Co., Ltd. are jointly and severally liable for the payables of the Bankrecognized before the spin-off date.

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